Assets under management (AUM)

The total value of the investments a fund, advisor or firm manages on behalf of clients.

Example

A fund with $2 billion in AUM charging a 1% fee collects $20 million a year regardless of how it performs.

Many fee structures are based on AUM, not on results - understanding this explains a lot about how the investment industry is actually incentivised.

Fee drag — The compounding cost of fees over time, which is far larger than the fee's annual percentage suggests on its own.
Expense ratio — The annual fee a fund charges, expressed as a percentage of the money you have in it.

Add up the fees for all ten years before you compare two funds — Management fees are usually quoted as an annual percentage, but what matters is the total over the fund's life, and whether the fee is charged on committed or invested capital. (10 min)
Ask how the manager gets rich, and whether it requires you to — Fund economics shape manager behaviour. Alignment is strongest when managers commit meaningful personal capital, depend on carry rather than fees, and keep fund sizes suited to their strategy. (10 min)
Appraising one fund: the holdings file, the rules, and the gap to the index — Seven checks, in order of how much they change what you own. The two everybody runs - the name and the expense ratio - are the two cheapest, and the one nobody runs is where the exposure lives. (14 min)
The cost of fees — A 1% fee doesn't sound like much. Compounded over decades, it can quietly consume a quarter or more of everything you would otherwise have earned. (10 min)
Appraising one fund: the manager, the finished track record and the fit — Evaluating a venture fund is mostly evaluating a team and whether their past results came from something repeatable. (14 min)