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 diversifiedportfolio of stocks, bonds and also has a significant cash position as well.Assuming that the break of the portfolio is as follows:
- INR 10000 crores in stocks
- INR 7000 crores in government bonds
- INR 5000 crores in corporatebonds
- 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 thevalue of an investment fund’s total assets minus its total liabilities dividedby the number of units. This can be used to calculate how much a particularshare of an investment fund is worth. Similar to AUM, NAV fluctuates daily asthe 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 apercentage of the assets they have under management for that particular client.They are expressed in hundredths of a percentage point, known generally as thebasis point (bps). These charges are usually paid periodically and can becalculated on a daily, monthly, quarterly or other agreed upon basis.
Asset under managementinsurance 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)
Assetunder management of LIC is at Rs 31 lakh crores,which is one-sixth of the size of India’s GDP, the government said in thebudget on 1st February 2020
Assetunder management of Max life insurance is at Rs68,471 crores for the financial year 2019-20
Assetunder management of SBI Life is at Rs 1,64,190crores 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.
