Assets Under Management (AUM) refers to the total market value of the investments that a financial institution or individual manages on behalf of clients. AUM includes the capital raised from investors and the earnings generated from those investments, and it can fluctuate based on the inflow of investor capital and the performance of the managed assets.
AUM is a key metric used in the finance industry to measure the size and success of investment firms, mutual funds, hedge funds, and other asset managers. It reflects the firm's ability to attract and retain investors' capital, serving as a proxy for the trust and confidence investors place in the firm's management capabilities. Higher AUM can lead to economies of scale, potentially reducing operational costs relative to managed assets and influencing investors' decisions. Asset managers earn their revenue primarily through management fees, which are often calculated as a percentage of AUM, making it a critical figure for assessing a firm's financial health and operational success.
