AUM: Assets Under Management Definition and Significance
Definition
Assets under management (AUM) is the total market value of financial assets that a financial institution manages on behalf of its clients. AUM is the principal measure of size and scale in the wealth management and asset management industries, used to assess the market position of banks, investment firms, and fund managers, and to calculate management fees.
Calculation
AUM is typically calculated as the aggregate market value of all client assets over which the institution exercises investment management authority or advisory oversight. The calculation includes:
- Securities (equities, bonds, structured products)
- Cash and cash equivalents
- Collective investment schemes (fund holdings)
- Alternative investments (private equity, hedge funds, real estate)
- Other investable assets under management authority
AUM fluctuates based on three factors:
Market performance. Changes in the value of managed assets due to market movements — rising markets increase AUM, falling markets decrease it.
Net new money. The difference between new client assets flowing into the institution and client assets withdrawn. Positive net new money growth is considered a key indicator of commercial success.
Currency effects. For institutions managing assets in multiple currencies, exchange rate movements affect reported AUM when consolidated into a single reporting currency.
Significance in Swiss Private Banking
In the Swiss private banking sector, AUM is the most closely watched metric. Switzerland manages approximately CHF 7.9 trillion in total banking assets, with a substantial proportion attributable to cross-border wealth management — making Swiss banks collectively the world’s largest managers of international private wealth.
AUM determines several important outcomes:
Fee revenue. Management fees are almost universally expressed as a percentage of AUM. A Swiss private bank charging 0.75 per cent on CHF 10 billion of AUM generates CHF 75 million in annual management fee revenue. This direct link between AUM and revenue makes asset gathering a core strategic priority. For more on fee structures, see our analysis of wealth management fee trends.
Regulatory capital. Under the Swiss Financial Institutions Act (FinIA), certain financial institutions — particularly managers of collective assets — have capital requirements linked to AUM, with additional capital obligations triggered at specified AUM thresholds.
Market positioning. AUM rankings are closely followed by industry analysts, media, and clients. A bank’s AUM ranking influences its perceived prestige, its ability to attract talent, and its competitive positioning in the market.
Operational scale. Larger AUM provides economies of scale in investment management, research, technology, and compliance — enabling lower unit costs and potentially better investment outcomes.
AUM in Context
AUM should be interpreted with care, as it can be measured and reported in different ways:
Discretionary vs advisory AUM. Some institutions distinguish between assets managed under discretionary mandates — where the institution has full investment authority — and assets under advisory arrangements, where the client makes final decisions. Discretionary AUM is generally considered a higher-quality measure, as it reflects assets over which the institution exercises direct control.
Double-counting. In large financial groups, the same assets may be counted in the AUM of multiple divisions (e.g., both the private banking and asset management divisions), leading to inflated consolidated figures if not properly adjusted.
Custody vs management. Some institutions report total client assets, which includes assets held in custody without active management. This broader measure can significantly exceed AUM as commonly defined.
AUM Growth Drivers
Swiss private banks and asset managers pursue AUM growth through several strategies:
- Client acquisition — attracting new clients through relationship management, marketing, and referral networks
- Share of wallet — increasing the proportion of an existing client’s assets managed by the institution
- Investment performance — strong performance attracts new clients and retains existing ones, whilst also increasing the value of managed assets
- Mergers and acquisitions — acquiring other institutions or client portfolios to achieve step-changes in AUM
- Geographic expansion — entering new markets to access additional pools of investable wealth
The competitive dynamics of AUM growth are particularly intense in Swiss portfolio management, where institutions compete for a finite pool of global private wealth.
Reporting and Disclosure
Swiss financial institutions report AUM in their annual and interim financial statements, with breakdowns by division, geography, asset class, and currency. FINMA and the Swiss National Bank collect AUM data as part of their regulatory and statistical reporting frameworks.
The transparency and comparability of AUM reporting have improved in recent years, driven by regulatory requirements and market expectations. However, differences in definition and methodology across institutions can still make direct comparisons challenging.
Donovan Vanderbilt is a contributing editor at ZUG FINANCE, the Swiss private banking and fintech intelligence publication of The Vanderbilt Portfolio AG, Zurich. He covers wealth management, institutional finance, and regulatory affairs across the Swiss financial centre.