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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