Assets Under Management (AUM)
Definition
AUM is the total market value of assets an investment manager manages on behalf of clients. It is the revenue base for asset managers, hedge funds, and private capital firms: management fees are charged as a percentage of AUM, so AUM level and growth drive the P&L.
AUM changes via two channels — net flows (client money in minus out) and market performance — and analysts always split growth between them, since flows signal franchise health while markets are exogenous. Fee rates vary enormously by product: passive index funds charge single-digit basis points, active mutual funds tens of bps, and alternatives charge management fees of 1.5–2% plus performance fees (the classic '2 and 20' hedge fund / PE construct, with actual terms varying and generally compressing).
For private capital firms, fee-paying AUM (committed capital that actually generates fees) is the more precise revenue driver than headline AUM.
Why interviewers ask
Asset-management coverage sits inside FIG, and interviewers ask how these businesses make money and what drives valuation — the answer is AUM, the flows-vs-markets split, and fee-rate mix (with fee-related earnings prized for their stability at alternatives firms). It's also core literacy for buy-side conversations.
Related terms
Interviews don't test definitions — they test recall under pressure.
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