# Assets Under Management AUM Definition Calculation and Example

## Assets Under Management (AUM) Definition

Assets Under Management (AUM) refers to the total value of assets that a financial institution or an investment manager manages on behalf of their clients. It is a key metric used in the finance industry to measure the size and success of a firm or an individual’s investment portfolio.

AUM includes various types of assets such as stocks, bonds, cash, real estate, and other investments. These assets are typically owned by individual investors, institutional investors, or funds, and are entrusted to the financial institution or investment manager for management and growth.

Financial institutions and investment managers use AUM as a measure of their business success and profitability. Higher AUM generally indicates a larger client base and more assets under their management, which can lead to increased revenue and potential for higher fees or commissions.

Investors also consider AUM when choosing a financial institution or investment manager. A higher AUM may be seen as a sign of trust and credibility, as it suggests that other investors have entrusted their assets to the firm or individual.

## What is Assets Under Management (AUM)?

Assets Under Management (AUM) is a financial term used in the field of portfolio management. It refers to the total market value of all the assets that a financial institution or investment company manages on behalf of its clients. These assets can include stocks, bonds, mutual funds, real estate, and other types of investments.

AUM is an important metric for investors and financial institutions as it provides a measure of the size and success of a firm’s investment portfolio. It is often used as an indicator of the company’s ability to attract and retain clients, as well as its overall financial health.

### Calculation of Assets Under Management (AUM)

The calculation of AUM involves adding up the market values of all the assets that a financial institution manages. This includes both the assets owned by the institution itself and those owned by its clients. The market value of each asset is determined by multiplying the number of units or shares by the current market price.

For example, if a financial institution manages 100,000 shares of a stock with a current market price of \$50 per share, the market value of that asset would be \$5,000,000. The AUM would be the sum of the market values of all the assets under management.

### Example of Assets Under Management (AUM) in Portfolio Management

Let’s say a portfolio management company manages investments for various clients. The company has \$10 million worth of stocks, \$5 million worth of bonds, and \$3 million worth of real estate in its portfolio. The AUM for this company would be \$18 million, which is the sum of the market values of all the assets it manages.

## Calculation of Assets Under Management (AUM)

Assets Under Management (AUM) is a key metric used in the field of portfolio management to measure the total value of assets that a financial institution or investment firm manages on behalf of its clients. It provides an indication of the size and scale of the firm’s operations and the amount of client funds entrusted to them.

The calculation of AUM involves summing up the market value of all the assets held within a portfolio. These assets can include stocks, bonds, mutual funds, real estate, and other investments. The market value of each asset is determined by multiplying the number of shares or units held by the current market price.

To calculate AUM, the portfolio manager or investment firm needs to gather accurate and up-to-date information on the quantity and price of each asset in the portfolio. This information is typically obtained from various sources, including financial statements, custodian reports, and market data providers.

Once the necessary data is collected, the calculation of AUM involves adding up the market values of all the assets in the portfolio. This can be done manually or using specialized software or tools designed for portfolio management.

The calculation of AUM is not only important for measuring the size of a financial institution or investment firm, but it also plays a crucial role in determining the fees charged to clients. Many firms charge a percentage of AUM as a management fee, so accurate calculation is essential for ensuring fair and transparent fee structures.

## Example of Assets Under Management (AUM) in Portfolio Management

Assets Under Management (AUM) is a key metric used in portfolio management to measure the total value of assets that a portfolio manager or investment firm manages on behalf of clients. It provides insight into the size and scale of a firm’s investment operations.

### Calculation of AUM

The calculation of AUM involves summing the market value of all the assets held within a portfolio. These assets can include stocks, bonds, mutual funds, real estate, and other investment vehicles. The market value is determined by multiplying the number of units or shares held by the current market price of each asset.

For example, let’s consider a portfolio that consists of 1,000 shares of stock A, valued at \$50 per share, and 500 shares of stock B, valued at \$100 per share. The calculation of AUM would be as follows:

Asset Number of Shares/Units Market Price Market Value
Stock A 1,000 \$50 \$50,000
Stock B 500 \$100 \$50,000
Total AUM \$100,000

### Significance of AUM

AUM is an important metric for portfolio managers and investment firms as it provides a measure of their success and influence in the market. A higher AUM indicates a larger client base and more assets under management, which can attract new clients and generate higher fees and revenues for the firm.

Additionally, AUM is used by investors to evaluate the size and stability of an investment firm. A larger AUM may suggest that the firm has a track record of successful investments and a strong reputation in the industry.

However, it is important to note that AUM alone does not provide a complete picture of a firm’s performance. Other factors such as investment returns, risk management, and client satisfaction should also be considered when evaluating the effectiveness of a portfolio manager or investment firm.