Assets Under Management

Asset Under Management
Source: Tavaga

Asset Under Management in India

Assets Under Management (AUM) Meaning

When an AMC manages a pooled sum of money from clients, the invested amount is called the assets under management or AUM. It is the total market value of the investments that an asset management company (AMC) manages for its clients.

Assets under management formula

Imagine an AMC that manages a diversified portfolio of stocks, bonds and also has a significant cash position as well. Assuming that the break of the portfolio is as follows:

  1. INR 10000 crores in stocks
  2. INR 7000 crores in government bonds
  3. INR 5000 crores in corporate bonds
  4. INR 2000 crores in cash

Then the total market value of the assets under management would be INR 24000 crores. Sometimes the asset management companies also take into consideration the pension funds handled by them under asset under management formula.null

How to calculate assets under management?

AUM can be calculated in different ways, depending on the firm’s discretion. The calculation is done on the basis of either the total capital that the firm handles or calculating the Individual client’s money. Also, sometimes overall cash, mutual funds, and fixed deposits are not considered.

Instead, only the capital that can be traded by the executive on behalf of the client is calculated. AUM changes from day-to-day depicting the variable returns from Stocks & mutual funds and change in prices of fixed investment.

For ex: – Changes in the price of a land in which money has been invested by the firm. Keeping track of it is extremely important as it helps to manage funds better and to exit when returns are negative.

Importance of AUM

AUM helps to build the market value of the firm. It can be used as a market tool to attract potential new customers, and it was able to generate sufficient returns. This increases the credibility of the Investment firm or brokerage house or portfolio manager, which will eventually help to get more clients and more capital for the investment firm. Analysis of returns of every asset under management is crucial as it helps to know which investment decisions could perform as expected, which ones outperformed and which ones underperformed. Generally, having higher returns depicts the efficient management of the Investment firm.

Difference between AUA and AUM?

AUA refers to the assets under administration. In this, assistance on tax reporting, accounting of funds and various other administrative services related to the fund are provided, Whereas an AUM refers to the total assets that are managed, in terms of making further investments to generate returns, by the financial institution or brokerage house or portfolio manager.

What is the difference between AUM and NAV

Funds total Assets under management (AUM) should not be confused with its net asset value (NAV). NAV is calculated as the value of an investment fund’s total assets minus its total liabilities divided by the number of units. This can be used to calculate how much a particular share of an investment fund is worth. Similar to AUM, NAV fluctuates daily as the value of assets and liabilities change with the market.

What is AUM Fee?

An AUM Fee is any charge that mutual funds, investment advisors and other financial professionals charge their clients as a percentage of the assets they have under management for that particular client. They are expressed in hundredths of a percentage point, known generally as the basis point (bps). These charges are usually paid periodically and can be calculated on a daily, monthly, quarterly or other agreed upon basis.

Asset under management insurance companies

Asset under management of HDFC Life is Rs 1.3 lakh crores as of 31 March 2020. (Debt: Equity Mix- 71:29; more than 96 percent are in government securities and AAA bonds as of 31 March 2020)

Asset under management of LIC is at Rs 31 lakh crores, which is one-sixth of the size of India’s GDP, the government said in the budget on 1st February 2020

Asset under management of Max life insurance is at Rs 68,471 crores for the financial year 2019-20

Asset under management of SBI Life is at Rs 1,64,190 crores as of 31 December 2019.

Who has the most assets under management?

What is AUM in mutual funds?

The overall market value of investments that a mutual fund holds is referred to as AUM in mutual funds.

Asset under management in mutual funds

Assets under management rankings

SBI mutual funds have the highest assets under management, followed by HDFC mutual funds and ICICI Prudential Mutual Fund as of 30 September 2020.