An overview of AUM

01 October 2015

David Boyle – Funds and DFM Researcher

Assets under management (AUM) refers to the market value of investments managed by a firm on behalf of investors, and in this case more specifically total assets that are managed on a discretionary basis and at group level.  AUM encapsulates organic growth (i.e. internally generated) of assets, capital appreciation as well as capital losses and in the inflows and outflows of client money.

Defaqto collect data on some 81 firms offering discretionary services, and the table below illustrates the key numbers advisers may wish to consider when incorporating a firms AUM into their due diligence processes.

 

2015

2014

% Change

Total Group AUM

£1336.1bn

£1076.5bn

24.1

Average Group AUM

£16.7bn

£14.1bn

18.4

Total Discretionary

£255.5bn

£229.5bn

11.3

Average Discretionary

£3.2bn

£3bn

6.6

Total New Business

£24.5bn

£21.2bn

15.5

Average New Business

£0.37bn

£0.36bn

2.7

12 Month Growth %

33

27

22

Table 1: Source Defaqto 2015.

Analysis 

Most notably, the percentage change figures remain positive across each field. In terms of the total group assets, these continue to increase steadily despite macroeconomic factors and are bolstered by mergers and acquisitions of smaller firms, organic growth and strong market performance at the beginning of 2015. Group AUM figures include assets managed on a discretionary basis and those that are not, and so the figures tend to behave a little more erratically year on year and are influenced largely by the activities of the financial behemoths.

Conversely, the discretionary data shows a steady uplift of 6.6% on 2014, perhaps reassuringly demonstrating that large unexpected inflows/outflows are not common occurrences.

The percentage growth figures do not present anything too complex and the above average growth is a likely result of new entrants to market where of course there is no ‘previous’ data to calculate a true 12 monthly percentage growth figure.

Inflows & outflows

A multitude of factors affect the flows of money in and out of a firm and not all are as ominous as one might think. Large client withdrawals at retirement, payment of school fees and the movement of funds out of investments (under advisement of the firm in many cases) would contribute to negative growth on a small scale. By the same token government credit-rating downgrades, ‘Lehman events’ and to a lesser extent de-listing of funds will all have significant impact on fund outflows.

New business flows remain consistent over the last 12 month period in line with the discretionary figures and, generally speaking, are rather neatly dispersed across all the firms included in the calculations.

Historically, asset management firms have used AUM as a measure of success against competitors for obvious reasons although both larger and smaller firms offer their distinct advantages depending what the client requirements may be. 

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