When choosing a mutual fund, one of the indicators or measurements that investors need to pay attention to is asset under management (AUM). These assets can be in the form of various types of investments, ranging from stocks, bonds, mutual funds, property, and other financial instruments.

Please note that AUM reflects the total funds invested by clients or investors in the products or services offered by the asset management company.

In addition, AUM itself is important as a measure and indicator of the performance of an asset management company. One of them is that AUM can be a direct measure of the business scale of an asset management company. The greater the AUM, the greater the potential income from management fees charged to investors.

On the other hand, asset management companies usually charge investors a management fee based on a percentage of AUM. Thus, the greater the AUM, the greater the income generated by the company. The income can be used to develop the business, expand the investment management team, and improve services to clients.

So, to better understand what AUM is, how it functions, factors that affect the amount of AUM, the importance of AUM for investors, AUM’s role for companies, and the future of AUM in the crypto world, see the full review below.

What is AUM?

As mentioned earlier, AUM, or assets under management, is a term used in the context of traditional finance and investment that refers to the total value of assets or funds managed by an entity, for example, an asset management company or investment manager.

AUM serves as an important metric in gauging the business scale and attractiveness of an asset management company. Basically, AUM is a collection of funds managed by the entity to achieve specified investment objectives.

Typically, asset management companies charge investors a management fee based on a percentage of AUM. Thus, the greater the AUM, the greater the potential income generated by the company.

The way AUM reflects the total value of assets managed is by adding up the market value of all investments managed by the entity. For example, if an asset management company manages an investment portfolio consisting of stocks worth $50,000,000, bonds worth $30,000,000, and mutual funds worth $20,000,000, then their total AUM is $100,000,000.

AUM function

Basically, it is important to understand the function of AUM, especially in the context of finance, investment, and asset management. This understanding of AUM’s functions will assist individuals and institutions in making better investment decisions, understanding the potential impact of a company or platform, and measuring success in managing assets and funds. The following are several AUM functions, including:

1. Success Indicators

AUM is an indicator of the success of the investment manager’s performance in managing mutual fund products. It is known that the high value depends on the large amount of investor funds managed by investment management companies. In this regard, investment funds and investment manager experience will greatly affect the amount.

In addition, an investment management company often compares the amount of funds under management with that of its competitors as a measure of success. Therefore, investment management companies can evaluate product performance so that they are able to provide optimal returns. This is because these indicators provide transparent investment manager performance results from time to time.

2. As an Investment Strategy Reference

An investor usually recognizes AUM before choosing which mutual fund product to invest in. Related to this, many people interpret that a good mutual fund product is one with lots of managed funds.

In addition to considering the total asset value, investors also often choose investment management companies with a brilliant track record so that they can get optimal returns from investing in mutual funds.

3. Shows investor confidence

The AUM that changes depends on the incoming and outgoing money of mutual fund investors. The amount of the asset value also refers to the amount of investor funds managed by the investment manager during a certain period. Investors will usually look at their reputation and the overall value of the assets they manage before investing.

Therefore, AUM provides important information that can attract the attention of new investors, so that the value of these assets becomes an indicator that reflects investor confidence in an investment management company. The more funds under management, the higher the investor confidence.

Factors Affecting the AUM Amount

After knowing the function of AUM, it is also important to understand the factors that affect the amount of AUM. Basically, understanding the factors that affect the amount of AUM is important in the financial and investment industries.

Later, a good understanding of these factors helps asset management companies and investors anticipate changes and plan strategic steps for sustainable growth. The following are the factors that affect the amount of AUM:

• There is a growth in the number of new investors or assets that will increase the value of AUM.
• AUM can decrease if the market price decreases, the amount of investment closing funds decreases, or the investor loses mone
• The value of the securities in which the AUM is invested This is because when the market value of the securities increases, the AUM of mutual funds will also increase.
• The amount of the company’s dividend in the institutional portfolio if it is reinvested

The Importance of AUM for Investors

AUM has an important meaning for investors, especially for those considering investing in products or services managed by asset management companies. The following are several important roles of AUM for investors:

1. Demonstrate transparency in investment manager performance.

By knowing their AUM, investors can see the performance of the investment manager who will later manage their funds. In this way, investors will gain transparency regarding the performance of this investment manager from time to time.

2. Investment Fund Management Supervision Facility

When investing in investment instruments, AUM is an important indicator of the company’s development and how the investment manager manages the invested funds. So, investors can determine whether the product is profitable or not.

3. Liquidity Indicators When Assessing the Market

As mentioned earlier, the larger the AUM of a company, the higher the guarantee of large disbursements. This is very profitable if investors have liquid funds that are sensitive to large disbursements, so they can avoid offloading shocks.

4. Considerations for Choosing an Investment

AUM is a consideration that can assist investors in selecting instruments with the brightest prospects. Because the more investors there are, the more popular it is, and the public’s trust in mutual funds and the investment managers who manage them is higher.

The role of AUM for the Company

For companies, AUM also plays a significant role. Therefore, understanding the role of AUM is very important for asset management companies or investment managers because AUM has a significant impact on their operations, performance, and business strategy. The following is AUM’s role for the company, namely:

• Become the main marketing tool for attracting new investors.
• Become a determinant of the flow of investment, which will be a strength for the company to survive.
• Become an evaluation tool for companies to assess management performance.
• It is a measure of the success of a business because the bigger the AUM, the bigger the income in the form of management fees.
• Become a comparison tool for a company with competitors.

The Future of AUM in the Crypto World

It is also important to note that AUM’s future in the crypto world has significant growth potential. This is in line with the continued development of the crypto ecosystem and growing interest from institutional and individual investors.

In this regard, there are several potentials and developments that can be expected, including the increasing number of traditional financial institutions and large companies starting to touch the crypto market. Investments from institutions such as technology companies, banks, and insurance companies can bring significant amounts of AUM into the crypto ecosystem.

On the other hand, as the understanding of cryptocurrencies and blockchain technology increases, more individual investors may be attracted to investing in crypto assets. It could also lead to AUM growth through the participation of a wider range of individuals.

Meanwhile, the development of new trends and innovations in managing crypto assets, among others, includes portfolio management based on artificial intelligence (AI). The use of artificial intelligence and big data analysis can help asset managers optimize their crypto portfolios. AI algorithms can help identify investment opportunities and manage risk more efficiently.

Also, with increased regulation in the crypto sector, asset managers need to ensure stricter compliance with security regulations and standards. New security and identification solutions are emerging to help protect AUM and investor data.

Then, the staking/earn and rewarding protocol also allows crypto holders to earn returns by locking their assets in the blockchain network. It can be a new method of generating income from AUM crypto.

Conclusion

In conclusion, AUM is an important indicator in evaluating the success of a platform or company in the crypto ecosystem because AUM reflects the business scale of a platform or company in the crypto ecosystem. The larger the AUM, the greater the potential influence and revenue that the entity can generate.

In addition, a high AUM can show investor confidence in the platform or company. This reflects the quality of service, investment performance, and good track record in managing crypto assets.

Furthermore, understanding the AUM concept is very important for investors and participants in the crypto market because of the complexity and dynamics of this one market. Basically, an understanding of AUM will help investors accurately assess the business scale of a platform or crypto company. This helps investors evaluate the potential profit and risk of investments.

On the other hand, understanding AUM will also help investors make good investment decisions. Investors can judge the attractiveness of the platform based on its AUM size, historical performance, and other factors related to it.