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Assets Under Management (AUM) refers to the total market value of all the investments that a financial institution like a bank, mutual fund, or a private equity firm, or an individual such as a financial advisor or wealth manager, controls or manages on behalf of their clients.
AUM can include a variety of investment types, including but not limited to cash, mutual funds, stocks, bonds, real estate, and other types of financial assets. The level of AUM can be an indicator of the size and success of the institution or individual managing the assets, as well as the trust and confidence that clients place in them.
It's important to note that the AUM metric doesn't tell the whole story about an investment firm's performance or the value it provides to its clients. It does not necessarily reflect the returns generated for investors or the quality of the management services provided. It is just one of several metrics used to evaluate the performance and standing of investment managers.
Increases in AUM can come from two main sources: net inflows from new or existing clients, and positive returns on the investments being managed. Conversely, AUM can decrease due to net outflows (clients withdrawing funds or leaving the firm), and negative investment returns. Therefore, growth in AUM is often a key objective for such institutions or individuals, as it can lead to higher revenues from management fees, which are often calculated as a percentage of AUM.
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