ETF Dictionary

Understanding Assets Under Management (AUM) in Investment and ETFs: Meaning, Formula, and Importance.

Welcome to KIS Vietnam Education Hub!  In this article, we’ll delve into what AUM is, how it’s calculated, and why it’s crucial for investors, especially in terms of ETFs.

1. What is Assets Under Management (AUM)?

• Assets Under Management is the total value of all assets managed by an asset management company, investment fund, or brokerage firm on behalf of its clients. This can include cash, stocks, bonds, and any other assets held within the fund or portfolio. Think of it like this: you and other investors all  give money to invest to buy an ETF or any other investment offered by a fund manager. All the money that everyone puts together is called AUM (Assets Under Management). So, when you hear about AUM, it’s basically talking about how much money the fund manager is managing for everyone combined.

AUM in ETFs (Exchange-Traded Funds) 

• ETFs, or Exchange-Traded Funds are a type of investment fund traded on stock exchanges, similar to stocks. AUM reflects the scale of the fund, presents the total value of assets that investors have invested through trading ETF shares. AUM also reflects the fluctuation of asset values within the ETF due to changes in the number of investors or price fluctuations over a certain period.

Example of AUM:

The VinaCapital VN100 ETF (FUEVN100) is a popular ETF in Vietnam stock market designed to track and replicate the VN100 market indexThe VN100 index comprises the top 100 stocks based on market capitalization, liquidity, and free float-adjusted turnover criteria.

As of February 2024, the total assets of FUEVN100 ETF are reported to be 407.6 billion VND. This figure represents investments in stocks linked to the VN100 index, as well as cash and other assets managed by the Vinacapital.

2. Formula for Calculating AUM

• AUM Formula = Number of ETF shares purchased × Current price per ETF share.

3. The Importance of AUM

• AUM helps assess the performance and scale of an organization in the financial management industry. For investment funds like ETFs, AUM indicates the level of capital attraction from investors.
• AUM can affect the liquidity of a fund or ETF. A fund with a large AUM often has good liquidity, making it easier for investors to trade.
• AUM helps Fund Management Companies (FMCs) attract more capital through fund purchases, enhancing investment capabilities and business development activities.
• With this article, KIS Vietnam ETF hopes investors gain a basic understanding of Assets Under Management (AUM) in the field of financial management and ETF markets. Stay tuned for more insightful content from KIS Vietnam.