Funds Under Management (FUM): Here are 4 factors that cause it to rise and fall

Nick Sundich Nick Sundich, March 8, 2023

Funds Under Management (FUM) is a phase you’ll hear a lot of if you own shares in a financial advisory or wealth management stock.

But what does it allude to and why can it fluctuate?





Funds Under Management

Funds Under Management refers to the total amount of assets that a fund manager or institution has control over within a portfolio.

Funds Under Management plays an important role in evaluating the financial health of a financial firm.

It provides a comprehensive overview of the size and composition of a company’s assets, enabling better decision making by investors.

Funds Under Management can also help these companies internally.

Asset managers can assess diversification potential and risk levels within their portfolios, identify opportunities for growth or expansion, monitor positions across different asset classes and devise strategies that will generate returns over time.


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What could cause Funds Under Management to increase?

Simply put, it can increase by more funds flowing into the company.

Some of the reasons why Funds Under Management might increase include a good performance, favourable market conditions and competitive advantages.

The latter could include low fees and expenses compared to competitors, new and/or superior products relative to competitors, as well as diversification across multiple asset classes and sectors.

Finally, positive news reports about the fund manager or asset management company can encourage potential investors to invest with them.


What could cause Funds Under Management to decrease?

Many of these factors working in reverse could cause a decrease in Funds Under Management.

Some of the reasons include poorer performance, client departure and unfavourable market conditions.

One of the key differences between an increase and a decrease in Funds Under Management is that the latter is more likely to cause scrutiny towards the financial institution.


Many ASX financial institutions have seen declines over the last 12 months

At the start of CY22, poster-child ASX investment company Magellan (ASX:MFG) had $116.4bn in FUM – $30.2bn retail and $86.2bn institutional.

At the start of CY23, this had shrunk too $50.2bn in FUM – $20.6bn retail and $29.6bn institutional. Ouch.

Obviously the investment markets have not performed well, but the issue has been compounded by investors pulling their money – most notably British wealth manager St James’ Place. Magellan been unable to justify the premium fee structure it charges above its peers.

Even Magellan’s peer Pinnacle (ASX:PNI) didn’t escape a fall in FUM in CY22.  It’s Aggregate Affiliate FUM fell 6% to $83.7bn and saw $1.2bn in net outflows during the July quarter alone.


FUM is important, but not the be all and end all

Although Funds Under Management is an important metric to watch, it is not the only one.

Other factors to consider include balance sheet strength, customer numbers and the winning or losing of any major clients.

If some of these are positive even though FUM is down, this might be a sign that the company is a good company and will rebound when markets do.

But if they paint a poor picture, investors should either avoid or sell out of the company in question.


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