What are Assets Under Management?

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Overview:

Kotak Mahindra Group recently merged the investment advisory business and alternate fund management business that will have a $18-billion cumulative assets under management.

About Assets Under Management

 

  • What is it? AUM is the total market value of investments a financial institution owns or manages on behalf of its clients.
  • These assets can include various types of financial products, such as mutual funds, hedge funds, exchange-traded funds (ETFs), pension funds, and other investment vehicles.
  • 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.
  • AUM fluctuates daily reflecting the variable returns from stocks, mutual funds and change in prices of fixed investment.

 

Importance of Assets Under Management

  • AUM helps to build the market value of the firm.
  • It can be used as a market tool to attract potential new customers. The higher a firm's AUM is, the more likely people are to trust them and invest with them.
  • A fund's management fees and expenses are often calculated as a percentage of AUM.

 

What is Book value and Market value of a company?

  • A company's book value is the amount of money shareholders would receive if assets were liquidated and liabilities paid off. The book value of an asset is strictly based on the company’s balance sheet.
  • The market value is the value of a company according to the markets based on the current stock price and the number of outstanding shares.
  • When the market value is less than book value, the market doesn't believe the company is worth the value on its books.
  • A higher market value than book value means the market is assigning a high value to the company due to expected earnings increases.

 


Q1) What are hedge funds?

Hedge funds are a type of investment fund that pools capital from accredited individuals or institutional investors and invests in a diverse range of assets and strategies. These funds are typically managed by professional portfolio managers or investment advisors with the aim of generating high returns for their investors.

Source: Kotak merges alternate fund, advisory into $18-billion asset management business