Assets like a house? or money you can use to trade?
In: Mathematics
Assets Under Management (abbreviated as AUM) refers to the assets that a wealth management company, stock brokerage, mutual fund company or hedge fund is holding for their investors. Suppose I open a wealth management firm and get my brother in law to give me $1000 to manage. My AUM is $1000. I don’t own this, my brother in law does. Now suppose that I invest it well and it has doubled to $2000. My AUM is now $2000. Retail investors don’t have AUM. And real estate would only count if it was being held in trust by some management company for the benefit of the actual owner.
This is a term very commonly used in – banks, investment firms, or any asset management company
Think of it this way, imagine you own a bank, that manages all the money in your family (that is, your mothers, fathers, grandparents’, etc..) Now, you are responsible for making any decisions/investing that money, according to the goals and preferences of your family members (how much risk they’re comfortable with, how much growth they want) ALL THE MONEY YOU ARE HANDLING FOR THEM, ARE YOUR “assets under management”.
Now apply this to a big bank, for example, if the bank manages $500M for their clients, the bank’s assets under management would be $500M, and the bank would be responsible for making all the decisions regarding the investing/managing of that money.
Simply put, its a big basket of money that the bank manages for it’s clients, and the basket includes all the investments (like stocks, bonds, and real estate) that the company manages for its clients.
assets under management – is usually used to describe the amount of money in a fund or portfolio.
your house is an asset you own and part of your net worth….but you would very rarely see it described as an asset under management
“assets under management” is money/assets you are in charge of but are not yours. (assets can be literally anything with monetary value. i.e. If you can sell it for money its a asset. For example my 401k is with vanguard. I do not decide what stocks bonds etc. get bought or sold, vanguard does. However much money I have with vanguard contributes to their assets under management as they control the assets but the assets belong to me.
vanguard decides how to best use the money/assets to maximize my returns and in exchange I pay vanguard a percent to do so.
A terribly abiguous term. I wish people would use NAV (Net Asset Value) instead.
USSUALLY when causally talking people use the term AUM (Assets Under Management) they mean “The net amount of money currently controlled by the manager, on behalf of clients.”
So if you had 50 clients each give you 100,000 last year, and you had a performance of 10%, and you aren’t charging fees, your current AUM would be something like: $5.5Million.
Where it get tricky, and NAV is a clearer term is when you involve leverage.
Lets say you are a hedge fund, and you TYPICALLY hold 2x long 2x short and 1x cash.
So in the above scenario, you hold $11million in equity, have $5.5 million in cash, and owe $11million is other equities.
You have positive assets of $16.5 million, and negative assets (liabilities/debt) of $11million.
MOST finance people would use AUM, in that case, and still mean the Net $5.5 Million. Many regulators would be all over the board on if you had $16.5 (positive assets), $22 (the absolute value of all exposure), 27.5, (the absolute value of all HOLDINGS) or some other number depending on if any of those holdings were in derivatives.
NAV is not ambiguous, this way.
It’s typically a term used by money managers to show how much money they invest on behalf of their customers. It’s not the company’s money, it’s their customers’, but they manage it.
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