There are several important requirements to investing in mutual funds that are not found in any other investment tool. Assets under management (Aum). In the following article The authors will discuss what AUM is and why this term is important when investing in mutual funds.
Understanding Assets Under Management (AUM)
Assets under management (AUM) are all assets managed by an investment manager. In addition to asset management companies, the term AUM is often used by banks and other financial institutions.
In mutual funds, all AUM levels are one of the benchmarks for quality of service provided by the respective investment managers. Generally, the higher the AUM value, the better the company’s efficiency and experience in managing investors’ money, because The high and low AUM values managed by the company demonstrate the level of investor confidence in the company.
in the financial industry The size of an investor’s AUM ratio is one of the considerations for investment firms to provide additional services to these investors. For example, investors are eligible for financial advisory services. Have access to hedging services and others usually in addition to all the AUM that the investor owns. The management company also requires other things such as the investor’s total annual income.
According to OJK Regulation No. 23/POJK.04/2016, the minimum AUM value for Indonesian Investment Managers is Rp 10 billion. This value has no maximum value. Considering that the higher the AUM, the better.
How to Calculate Assets Under Management
As mentioned above, the word Assets under management It cannot be applied to only one type of financial company. Therefore, the method of calculating AUM from company to company may vary depending on the business model.
For the context of investment management companies There are several factors to consider when calculating total AUM:
- Volatility in the amount of money in and out of investors
- Portfolio Performance
- Capital gains from a 1-3 pound increase in portfolio prices make the total AUM different every day.
- Dividends reinvested by investors
- increase the number of investors
- Closing one of the related mutual fund products resulted in a decrease in total AUM.
- The value of the investment portfolio has declined.
Why are assets under management important?
AUM is used by investors as a measure of a company’s performance and the confidence of other investors in the investment management company. Investors also use this variable to calculate the amount of management fees the company uses.
for investment management companies This variable is useful for tracking portfolio performance. Attract new investors to the service and use it as an assessment medium to determine the strengths and weaknesses of the company.
Difference Between AUM and NAV
Another term that is no less important when investing in mutual funds is net asset value (NAV). Net Asset Value (NAV)AUM and NAB are often mistaken for two terms that describe the same thing.
Although both represent indirect investment management efficiency, AUM and NAV are two different things. The difference is:
- AUM is all investment assets managed by the company while NAV is total assets after deducting liabilities managed by companies in mutual funds only.For example, an investment manager manages mutual fund A, mutual fund B, and mutual fund C.
Therefore, NAV is the asset value managed by the investment manager in each mutual fund. Therefore, each mutual fund can have different NAVs. Total AUM is all assets managed by the investment manager in mutual funds A, B, and C. In other words, Total AUM = NAV A + NAV B + NAV C.
- NAV is in terms of per share or per unit while AUM is not.. The NAV value is set daily when the capital market is closed. This value is divided by the number of relevant mutual funds circulating to show its net asset value per unit. NAV per unit thus becomes the price of the mutual fund. on the other hand, Assets under management (AUM) is not defined as such.
Relationship Between AUM and Investment Manager Performance
High and low AUM indirectly indicates high and low investor confidence in using the services of investment managers. The logic is that investors will not commit large sums to companies with no clear history.
But you have to keep in mind that AUM is just one of the many factors you need to consider when choosing. Best performing investment managerYou also need to check the investment manager’s background and background before using his services. especially if you are going to invest in large quantities.
You must remember that asset management companies (investment management) usually does not just issue a single brand of mutual funds. and may also provide services other than mutual fund management Therefore, to choose the best mutual fund product, you need to look at the NAV of each mutual fund brand. Not only the total AUM value
Some investment managers have the largest AUM.
Here are some The largest total asset management company under management.:
- PTT Manulife Asset Management Indonesia
- PTT Bahana TCW Investment Management
- PTT Sucorinvest Asset Management Co., Ltd.
- PTT Asset Management Batavia Prosperindo
- PTT Independent Investment Management
- PTT BNI Asset Management Co., Ltd.
- PTT Trimega Asset Management Co., Ltd.
- PTT Capital Silendra
- PTT Schroder Investment Management Indonesia
- PTT Danreksa Investment Management.
Information on the list of investment managers with the most AUM included above is subject to change at any time. Considering that the total AUM size can change in one day as described above, therefore make sure you have access to the latest AUM total.
Assets under management (AUM) or managed funds AUM is the amount received by an investor managed by an investment manager regardless of the products and services these investors use. The total size of AUM represents the investor’s confidence in the investment manager involved. Therefore, this variable is important to consider when choosing an investment manager for both mutual fund investments and investments. Exchange-traded funds (ETFs).