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In the investment sector, the term "assets under management" (AUM) refers to the entire market value of all the assets that are handled by a specific investment company, mutual fund, hedge fund, or another institutional investor. Investors use AUM as a crucial indicator to assess their investment prospects and to gauge the size and performance of investment management companies.
The market value of all the assets that are under the control of a specific investment manager are added together to determine AUM. This covers securities such as stocks, bonds, property, goods, and other investment vehicles. The market worth of these assets is typically established by their current market prices, which might change depending on modifications in market circumstances, changes in interest rates, and other alterations in the economy.
For investment management companies, AUM is a crucial indicator because it has a direct impact on their earnings and profitability. Many investment managers charge a proportion of the assets they manage as a fee, therefore an increase in AUM increases the firm's revenue. As a result, investment managers frequently work to increase their AUM by luring fresh capital and raising the value of their current holdings.
AUM is a measurement of the quantity of the assets under the control of a specific investment manager, not of investment performance, it is crucial to highlight. A greater AUM does not guarantee superior investment performance, however it may be a sign of a competent investment manager. For the purpose of making wise investing decisions, investors should take AUM into account in addition to other elements such as investment philosophy, track record, and fees levied by the investment manager.
