Assets Under Management (AUM)

What Is Assets Under Management (AUM)?

Assets Under Management (AUM), also known as funds under management, is the total market value of the financial assets which an investment company manages on behalf of its clients. The term is widely used in the finance industry as a measure of the size of an investment management firm, and it reflects both the firm's ability to attract clients and its performance in increasing the value of their investments.

AUM covers a range of investment types, including stocks, bonds, real estate, and increasingly, digital assets like cryptocurrencies. It is a crucial metric because it is often linked to the income of the firm, as management fees are typically calculated as a percentage of AUM. Thus, higher AUM generally translates to higher revenue for the management firm. This value is important not only for investors and clients who want to gauge the scale and success of a firm but also for the firm's market reputation and competitive position.

How to Calculate Assets Under Management (AUM)?

The calculation of AUM in the cryptocurrency sector starts with summing up the current market values of all managed assets. This includes all types of cryptocurrencies and digital assets under the management firm's control. Market value is determined based on the current trading prices on various exchanges, which can fluctuate significantly. Therefore, the calculated AUM can vary from one moment to the next as market conditions shift.

Further complicating the calculation are inflows and outflows of funds from investors, which frequently occur in crypto asset management. For instance, if an investor adds to their holdings or withdraws a portion for personal use, these actions directly impact the total AUM. Additionally, the performance of the assets themselves—gains or losses due to market movements—also plays a crucial role in determining the AUM at any given time.

Assets Under Management (AUM) and Fees

The relationship between AUM and fees is straightforward but vital for both managers and investors to understand. Typically, investment managers charge a management fee as a percentage of the AUM. This fee structure incentivizes managers to increase AUM through successful asset management and attracting more capital. For investors, understanding the fee structure is important because these fees can diminish overall returns, especially if the AUM is large and the fee percentage is high.

Example of Assets Under Management (AUM)

Consider a hypothetical cryptocurrency investment fund that manages a diverse portfolio including Bitcoin, Ethereum, and several other altcoins. If the total market value of these assets is $100 million, then the AUM for this fund is $100 million. Suppose the fund charges a management fee of 2% annually; this means the annual fees generated from managing these assets would be $2 million. The fee structure directly ties the firm’s earnings to its effectiveness in managing and growing its AUM, highlighting why AUM is such a focal point for both investment managers and their clients.

Top Asset Management Firms by AUM

Asset management firms oversee vast amounts of money on behalf of their clients, including institutional investors, pension funds, and individual investors. The following list includes some of the top asset management firms globally, ranked by their assets under management (AUM) as of the latest reports. These firms are recognized for their significant influence and capacity in global financial markets.

1. BlackRock

AUM: Approximately $10 trillion

About: BlackRock is the world’s largest asset manager, known for its wide range of investment services including mutual funds, iShares (exchange-traded funds), and other investment vehicles. It is a major player in global finance and offers services in investment management, risk management, and advisory services worldwide.

%1. Vanguard Group

AUM: About $7.2 trillion

About: Vanguard is renowned for its low-cost mutual funds and ETFs. It operates under a unique client-owned structure, where fund shareholders own the funds, which in turn own Vanguard. This structure helps keep costs low, aligning the interests of the firm with those of its investors.

%1. Fidelity Investments

AUM: Over $4 trillion

About: Fidelity offers a wide range of financial services, including investment management, brokerage services, and more. Known for its customer-focused approach, Fidelity also provides extensive retirement services and has a strong presence in the direct-to-consumer investment market.

%1. State Street Global Advisors

AUM: Approximately $4 trillion

About: As the investment management division of State Street Corporation, State Street Global Advisors offers institutional investors and governments around the world a full array of investment strategies, tools, and solutions.

%1. J.P. Morgan Asset Management

AUM: Around $3 trillion

About: A part of JPMorgan Chase & Co., this firm provides global asset management solutions for institutions, intermediaries, and private individuals. Its product offerings include asset management in equities, fixed income, real estate, hedge funds, and multi-asset solutions.