ASSETS UNDER MANAGEMENT:
A GUIDE

Assets under management (AUM) represents one of the most fundamental metrics in the investment world. Whether you’re evaluating fund managers, choosing investment vehicles, or building your own portfolio, understanding AUM can provide crucial insights into investment opportunities and risks.

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Assets under management (AUM) outlines the scale of investments that a financial institution or fund manager controls on behalf of clients. 

This fundamental metric shapes everything from management fees to investment strategies, making it essential knowledge for anyone evaluating funds or building portfolios.

What Is Assets Under Management (AUM)?

Assets under management refers to the total market value of investments that a financial institution, fund manager, or individual manages on behalf of clients. 

Think of AUM as a snapshot of all the money and securities under a manager’s control at any given moment. This figure includes everything from stocks and bonds to commodities and cash holdings.

The AUM metric serves multiple purposes in the financial industry:

• For fund managers, it represents the scale of their operations and often determines their compensation, as management fees typically range from 0.5% to 2% of total AUM. 
• For investors, AUM provides crucial insights into a fund’s size, stability, and market influence.

Why AUM Matters to Investors

AUM indicates a fund’s operational scale and market influence, affecting everything from trading capabilities to fee structures and liquidity management.

The AUM metric offers investors the opportunity to assess whether a fund has sufficient resources to execute its strategy effectively. A fund managing $10 billion operates with vastly different capabilities than one managing $100 million, from trading infrastructure to research resources. 

The operational implications of AUM extend far beyond simple size metrics. Funds with substantial assets benefit from economies of scale such as:

• Being better able to negotiate preferential trading terms
• Gain access to exclusive investment opportunities
• Maintain more diversified portfolios
• Can access markets where the minimum unit size of financial instruments is prohibitively large

These advantages often translate into lower costs for investors and potentially better execution of investment strategies.However, being a large size can also be a burden. A fund managing $20 billion might struggle to invest in smaller companies without moving market prices, potentially limiting returns. This phenomenon, known as capacity constraints, particularly affects funds focused on small-cap stocks or illiquid markets.

The relationship between AUM and investor confidence creates important feedback loops: 

• Growing AUM often signals investor trust and strong performance, attracting more capital. 
• Declining AUM can trigger concerns about fund stability, potentially accelerating outflows. 

Understanding these dynamics helps investors interpret AUM trends beyond raw numbers.

How to Calculate Assets Under Management

Calculating AUM involves summing the current market value of all holdings, then adjusting for investor flows, dividend reinvestments, fees, and currency movements.

Example of AUM calculation:

• A fund holds 1 million shares of Company A trading at $10 per share.
• Plus $5 million in government bonds.
• $2 million in cash.
• Fund AUM = $17 million.

Expanding this simplistic example to include the other factors that might affect the total value of a fund outlines why establishing AUM may not be as straightforward as it first appears. Additional elements which need to be factored into the AUM calculation include:

• Market movements: Daily price changes directly impact AUM
• Net flows: The difference between subscriptions and redemptions 
• Dividend reinvestments: Automatically reinvested income increases AUM
• Currency effects: Exchange rate fluctuations affect international holdings
• Fee deductions: Management and performance fees reduce AUM

Global Leaders in AUM

The global asset management landscape remains highly concentrated among major players. One or another of the Big Three asset managers – BlackRock, Vanguard or State Street – is the largest shareholder in around 88% of S&P 500 companies.

 These figures change frequently based on market movements and investor flows but the scale of the AUM of some managers is highlighted by studying the two of the world’s largest asset managers.

• As of early 2026 BlackRock was the world’s largest asset manager with approximately $14 trillion in AUM. 
• The firm manages a wide range of assets from index funds to alternative investments. 
• Vanguard follows closely with $12 trillion.
• Its primary focus is low-cost index fund offerings. 
• The UK is the second largest asset management centre in the world, responsible for $13 trillion of mainstream assets.
• More than 50% of UK AUM is managed on behalf of overseas clients.

Understanding where AUM concentrates helps investors evaluate market dynamics. Large managers often set industry standards for fees, technology, and investment practices. Their investment decisions can move markets, particularly in smaller asset classes.

The concentration of AUM among leading managers reflects several trends:

• Passive investing growth: Index funds attract significant flows
• Economies of scale: Larger managers offer lower fees
• Technological advantages: Major firms invest heavily in systems
• Global reach: Leading managers operate across multiple markets

Factors That Influence AUM Growth and Decline

Changes to the price of held assets and currency market price movements are the prime drivers of AUM figures. Net flows of investor cash, regulatory changes, and fee structures create additional impacts. 

Fund AUM may also expand in size through mergers, for example the acquisition of Global Infrastructure Partners (GIP) by BlackRock in 2024 which contributed roughly $116 billion in client AUM.

Funds experiencing consistent outflows face a downward spiral: falling AUM leads to reduced resources and potentially worse performance, and further redemptions. 

Regulatory changes also affect AUM trends. The EU’s Sustainable Finance Disclosure Regulation (SFDR) has driven billions into ESG-focused funds, while new pension freedoms in the UK have altered retirement saving patterns. These structural shifts often create lasting changes in how capital flows between different fund types.

A breakdown of the factors which influence AUM is outlined in the table below.

Driver	What it means	Why it can change AUM
Market performance	Asset price movements	Rising markets increase holdings value; falling markets decrease it
Net flows	New investments minus redemptions	Investor confidence and preferences shift capital between funds
Currency movements	Exchange rate fluctuations	International holdings gain/lose value with FX changes
Dividend reinvestment	Income added back to fund	Compounds growth without new external investment
Fee deductions	Management and performance charges	Reduces AUM as fees paid from fund assets

Using AUM to Evaluate Investment Opportunities

One key factor for investors to consider is whether a fund’s AUM is appropriate for it to effectively apply the strategy it intends to.

A $50 million micro-cap fund might be ideally sized, while a $50 million global equity fund could lack the resources to compete effectively. The relationship between size and strategy determines whether AUM represents an advantage or limitation.

Investors commonly observe several AUM-related patterns:

• Small-cap funds: Often perform best with AUM between $100 million and $1 billion
• Large-cap equity funds: Can effectively manage $5-50 billion or more
• Fixed income funds: Scale well due to liquidity in bond markets
• Alternative strategies: May face capacity limits at lower AUM levels

Tracking AUM trends over time can be more beneficial than taking a snap-shot of current absolute numbers. Consistent growth suggests investor confidence and good performance, while declining AUM might indicate problems. 

Items relating to AUM which might offer an insight into the prospects of a fund manager are summarised in the table below. 

Metric	What it measures	Where it’s commonly used
AUM	Total value of all assets managed	Evaluating manager scale and resources
NAV	Per-share value of fund assets minus liabilities	Pricing fund shares for trading
Net flows	Difference between investments and redemptions	Assessing investor sentiment and fund momentum

Building Your Own AUM: Strategies for Success

The growth of AUM for fund managers and investment strategies typically results from the combination of strong performance, effective risk management, and transparent communication with investors.

Funds that consistently deliver risk-adjusted returns above benchmarks tend to experience inflows. However, performance alone rarely suffices. Successful managers are likely to also demonstrate robust risk management, clear investment processes, and effective communication.

The practical elements of AUM growth include:

• Track record development: Building credible performance history over multiple market cycles
• Operational infrastructure: Establishing systems to handle growing assets efficiently
• Regulatory compliance: Meeting requirements that enable institutional investment
• Distribution relationships: Developing channels to reach potential investors
• Capacity management: Balancing growth with strategy effectiveness

Understanding macro trends helps position strategies for sustainable AUM growth, for example tapping into the recent preference for alternative investments and the search for yield in low-rate environments. 

Final thoughts

Assets under management serve as a crucial metric for evaluating investment funds and understanding the asset management industry. While AUM provides valuable insights into fund scale, resources, and market position, it requires contextual interpretation. 

The relationship between size and performance varies significantly across strategies, and bigger isn’t always better. It is also important to consider AUM alongside other metrics like performance, fees, and risk measures. All of which play a role when selecting funds, evaluating managers, or simply comprehending market dynamics.

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FAQs

What’s the difference between AUM and NAV?

AUM represents the total value of all assets a manager oversees, while Net Asset Value (NAV) refers to the per-share value of a fund. NAV equals total assets minus liabilities, divided by shares outstanding. While AUM measures manager scale, NAV determines the price at which investors buy or sell fund shares.

Does higher AUM always mean better returns?

No, higher AUM doesn’t guarantee better returns. While larger funds benefit from resources and economies of scale, excessive size can constrain performance, particularly in less liquid markets. The optimal AUM varies significantly by strategy and asset class.

What are net flows and why do they matter for AUM?

Net flows represent the difference between new investor subscriptions and redemptions during a period. They matter because consistent outflows can force managers to sell holdings at inopportune times, while strong inflows provide capital for new opportunities. Net flows often indicate investor confidence in a fund’s strategy and management.

Is AUM the same as assets under administration (AUA)?

No, AUM and AUA differ significantly. AUM includes only assets where the firm makes investment decisions, while AUA encompasses all assets the firm administers, including those where clients retain investment control. AUA typically exceeds AUM as it includes custody and administrative services.

Does AUM include derivatives or leverage exposure?

AUM calculations vary in their treatment of derivatives and leverage. Some methodologies include notional exposure from derivatives, while others focus on invested capital. Always verify the calculation methodology when comparing AUM.