Tag: Assets Under Management

The One With $11 Trillion

There are a few different ways to calculate Assets Under Management. The SEC has prescribed ways to calculate Regulatory Assets Under Management. Often AUM and RAUM will differ depending on an adviser’s business model and client base.

But you can’t just make up RAUM.

Rubin Cedric Williams did so at his firm Vista Financial Advisors. He registered Vista Financial with the Securities and Exchange Commission in December 2021. He filed an update in April 2022 which listed the firm’s RAUM as $10 billion.

This large amount caught the attention of the SEC and started a “newly registered” exam with Vista Financial to kick the tires. During the exam Mr. Williams said his RAUM had grown to $180 billion and his sole client was a foreign trust. In April 2023, Vista Financial filed an updated Form ADV listing its RAUM as $11 trillion.

During the examination, Vista Financial produced a spreadsheet and delivered it to the SEC that was supposed to back up its claimed RAUM. One item was a bank account with 140 billion Euros. The SEC checked with the bank. That account never had more than $3500.

The spreadsheet listed $42 billion in a single issuance of US Treasury Bonds. That would have made the firm likely owning every bond in the issuance. Assuming the issuance was even that big. The SEC found no evidence that Vista Financial held any treasury bonds.

Then there is the fraud-ier stuff. Vista Financial purported to hold $3 billion in bonds from a corporation (unnamed in the filings). Vista Financial tried to open a brokerage account with a margin loan allowance using some of those bonds as collateral and citing Vista Financial’s registration with the SEC to support its legitimacy.

I was waiting to find some details behind this 2023 case hoping there would be some explanation for this craziness. Alas, the case has settled and no more detail have emerged. Mr. Williams agreed to be barred from any SEC registered firm.

Was Mr. Williams the scammer or was he being scammed? I was hoping to get an answer.

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How Do You Define AUM?

The Securities and Exchange Commission took a big step with private funds and setting a defined standard of Regulated Assets Under Management. There is still discretion in how different aspects are calculated. It works well for hedge funds and private equity funds. It starts breaking down as you have more alternative assets that fall outside the definition of “private fund” and “securities portfolio” that ties to the RAUM definition.

For real estate, INREV published a tool for defining Assets under Management: Assets Under Management (AUM) 2021.  

INREV interviewed a bunch of asset managers to figure out how they came up with their AUM numbers. The resulting paper summarizes the main components of AUM and options for each component. It’s not a prescriptive attempt to standardize AUM. It’s just a thought peice.

INREV came up with ten components. Each component has two to four different ways of treatment. For example, one component is the ownership of JV’s and co-investments, with these options:

  • 100% regardless of ownership
  • 100% if the asset is consolidated in the financials but ownership
  • 100% if asset mgmt services are provided for the asset, but ownership share only if not
  • % ownership share only

Of course you can argue that JVs may be treated differently than co-investments, so there could easily be more components and more options.

The INREV summary is a good way to think about it. With the ten components and each factor, that gets you to over 36,000 different ways to calculate AUM using the INREV breakdown.

Obviously, one driving factor is the “ask” accompanied by the AUM request. It means having to give a summary of what went into the AUM calculation.

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