AUM (Assets Under Management) is the total market value of the investments a fund manager, wealth platform or adviser manages on behalf of clients, measured at a reporting date. It is the main measure of an asset manager's size because most revenue is charged as a percentage of it. AUM moves with net flows and market performance, so a 20% market fall cuts fee income in proportion without any client leaving. Definitions vary, so regulators set their own: AUM thresholds decide SEC or state registration in the US and full authorisation under the EU AIFM Directive. In M&A, managers are often priced as a percentage of AUM, and buyers check client concentration and withdrawals after a change of control.
How is AUM calculated
AUM is the market value of client assets over which the firm has investment discretion, measured at a reporting date. It moves for two reasons: net flows (new money in minus withdrawals) and market performance. A manager reporting a 15% AUM increase may have attracted no new clients at all if markets rose 15%, which is why analysts split growth into flows and market movement.
Definitions vary. Some firms include assets under advice or administration where they do not make the investment decisions; others count committed but uncalled capital in private funds. Regulators therefore set their own definitions for threshold purposes.
Regulatory assets under management
AUM decides which rules apply. In the US, an investment adviser generally may register with the SEC once its regulatory assets under management reach $100 million and must register at $110 million; below $100 million it is usually regulated by its state, and it generally must deregister from the SEC if the figure falls below $90 million.
In the EU, the AIFM Directive requires full authorisation for an alternative investment fund manager whose AUM exceeds €100 million, or €500 million where the funds are unleveraged and investors cannot redeem for five years. Below these levels a lighter registration applies, without the EU marketing passport.
AUM fees and revenue
An illustrative wealth platform with £500 million of AUM charging an average 0.75% a year earns £3.75 million in management fees. If markets fall 20%, AUM drops to £400 million and revenue to £3 million without a single client leaving. That sensitivity is why buyers look at revenue per unit of AUM alongside AUM itself; a platform charging 0.25% on robo-advised accounts earns a third of what a 0.75% advisory platform makes on the same assets. Robo-advisors and ETF providers have pushed average fee rates down, so AUM growth has to outpace fee compression for revenue to grow.
AUM in asset manager M&A
Asset managers and wealth platforms are often priced as a percentage of AUM or as a multiple of fee revenue. Diligence checks client concentration, since one institutional investor mandate can make up a large share of AUM; contractual notice periods; and how much AUM clients may withdraw after a change of control. Many regulators, including the FCA and EU authorities, require prior approval of the new owner, which delays completion and gives clients time to move.