3/7/10

Hey, total PE newcomer. I read from a newspaper article that a PE fund raised $1.1 billion. Does this mean that the fund has $1.1 billion AUM? (I also read from another source that the fund had approximately 400 million AUM.) Sorry if this question is really basic, just trying to clear some things up, thanks.

Comments (72)

In reply to aceman
Best Response
3/12/10

Aceman, I still think we disagree on a number of points. I'll try to hit them one by one.

aceman:

Now, whether or not you agree, based on what i know (talking to and asking about AUM to countless PE professional, MDs, partners at top firms, taking advanced PE courses taught by MDs which discuss this EXACT AUM issue, completing modeling and calculation assignments on this EXACT issue) , the simple definition widely used in the industry is as follows:

AUM is funds committed minus funds exited

(sometimes with other more complicated calculations, based on fund terms, firm terms, LP terms, etc that's on a case by case basis and not worth gettin into here).

I suppose we're just going to have to straight up disagree here. I'm not sure who you have spoken with, but I find it hard to believe that you've spoken to numerous high-profile individuals in the industry regarding this topic. It seems like a bit of a strange conversation topic for you to have with all of these individuals. Anyways, hopefully you can see how this claim can look a bit suspect from where I and other readers of this forum sit. I'm not saying the conversations didn't happen, just that it appears exaggerated from my standpoint.

Okay, that said, the reason I disagree is because I have actual first hand experience that contradicts the conversations you have had. This experience stems from publically available information on PE shops' websites in addition to proprietary company "info packets" that I have collected during management presentations from my banker days. This gives me hard evidence to back my point. I have presented some of that evidence above, so I don't think there is anything more I can do in this department. Let's agree to disagree.

aceman:

As many people have mentioned, "active funds managed" is BY FAR the most widely used compared to "total funds managed throughout history, even though some of it you're not managing anymore".

What was said above is that active funds managed is a better metric to use when comparing various PE shops for the purposes of WSO folks looking for jobs. I think we can all agree that with all else being equal, more active funds managed results in generally larger investments and higher compensation. However, from my experiences, "total funds managed throughout history, even though some of it you're not managing anymore" is used far more frequently than "active funds managed" for the purposes of advertising on places such as websites and promotional materials.

aceman:

Especially when most firms give you a list of past funds raised, there's pretty much no good reason to even use the latter definition. If you want to know the size of the firm, look at AUM or active funds managed (used interchangeably) if its listed, if not then look at the last couple of funds raised from the list of funds, if not then look at the target investment sizes, usually in the investment strategy section.

As I mentioned above, you are correct that total AUM over the lifetime of the shop is not as useful of a statistic as active funds managed. However, as with all advertising, PE shops are looking to show themselves in the best light possible. The result is that they will almost always quote the largest AUM number possible, which is the sum of all active and inactive funds. Your argument is that defining AUM in this way is meaningless. I agree, but that doesn't mean it isn't the way that it is commonly presented in the industry.

aceman:

Hence, due to the vast popularity and common usage of my definition, along with the fact that its much more practical, wouldn't you say that is the default definition? This makes your definition the one that's misleading.

Again, I disagree that your definition is the "popular" or the "common usage" (in fact, it is quite the opposite). I do believe that your definition is the more pratical one. Unfortunately, this is one of those situations where the term's most "practical" usage is not the way the industry uses it.

aceman:

For the layman, my definition of AUM is much easier to understand as well. AUM = Assets under management = should be the things you're managing now. Why would you count it as AUM if you're not managing it, ie funds exited?? When you say how much money you have, do you say what you have right now, or every dollar you've ever owned in the past? Of course PE funds are a lot more complex, but like you said, this is targeting the layman who is looking for a simple definition or browsing through websites right? So my definition makes much more sense to them.

The layman's interpretation has nothing to do with this. The discussion is how do PE professionals utilize the term "AUM" on their websites. Whether the layman understands it or not is inconsequential to the methodology used to calculate it. Again, the question isn't "what would common sense tell us the definition is?" The question is, "how is the term AUM used in practice?"

aceman:

If you want to use examples, unless you can prove that EVERY single firm uses your definition only, then you're not proving anything. Because that's what you claimed in the very beginning right?

I concede, I don't have the time to confirm by checking every PE shop's website. In fact, you're right, there are probably a handful of shops out there that define AUM using your definition. However, the vast majority of them use the aggregate value of all their funds -- so that is what I am basing my advice off of.

aceman:

What I am jumping up and down about is not the fact that you disagree or offer another point of view, those are always welcomed. I am annoyed becuase here I am trying to teach people the right things, and your first reply post to me was basically tell me I am completely wrong and trying to prove yourself using a bunch of bad examples. You, my friend, are the one that is overreacting with your first reply to me. Go back and read your post if you don't think so.

Scroll up and re-read the first half dozen posts. My first reply to you was very nice and even acknowledged your point of view. You're the only one who has been accusatory, typing in caps, and throwing insults. Seriously, go re-read the posts, I haven't edited a thing.

aceman:

The thing is, compbanker, it seems like you yourself realize that you're wrong, based on your later posts. Your later post suggest that you agree more with what I said. Now that's fine, but you can see why I find your first argument ridiculous in the beginning.

I think you have mis-interpreted my posts. Hopefully this one will clear up my point of view. I remain steadfast that my usage is correct.

aceman:

Also, idiots like aardvark, THE"lackof"GAME, masterg, and people like that jump on the thread and use juvenile terms like they're in third grade, have absolutely no value to add whatsoever, and for no reason start digging up peoples past posts. And obivously they know nothing about the topic at hand. That just pissed me off, idiots like that should be kicked off the forum. My anger is more directly toward those guys, not you. I find your first post somewhat insulting, but its those other guys that are really pissing me off.

I can't speak for the other posters, that's up to them. I did find aardvard's post to your previous thread somewhat relevant, not because it offered an answer one way or another, simply because it shows your conversations with industry professionals and the lessons you learned in your classes occurred in the last ~6 months.

Props to anyone that just read my whole post. Hopefully you lost less time of your life reading it than I did writing it.

CompBanker

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3/7/10

You generally don't say a "fund" has a certain AUM, but rather an entire PE shop. The PE shop's AUM is equal to the sum of all its funds. So if a shop has 3 funds consisting of $200M, $500M, and $1.1B, the total AUM would be $1.8B.

CompBanker

3/7/10

Thanks very much appreciate it.

3/7/10

wrong answer. It is not as simple as adding together all the funds, it will depends on which funds they have exited as well.

3/8/10

In my experiences, PE shops (including mine) always advertise the sum of all their funds as their AUM, even if the funds have since been liquidated. I suppose you could get technical and say AUM is "active" funds only, but that would be misleading for someone who was looking at websites and trying to determine size.

CompBanker

In reply to CompBanker
3/8/10
CompBanker:

In my experiences, PE shops (including mine) always advertise the sum of all their funds as their AUM, even if the funds have since been liquidated. I suppose you could get technical and say AUM is "active" funds only, but that would be misleading for someone who was looking at websites and trying to determine size.

WRONG!! you're saying you work at a PE firm? let me guess, you haven't been there for long. jesus stop providing false information, i'm trying to help people out here, what YOU'RE saying is MISLEADING.

3/9/10

Aceman is right. You may work at a PE firm CompBanker, but you have no idea what is happening at a level above your spreadsheets. Don't comment if you don't know.

Why would you refer to getting technical? Don't know know PE is all about being technical? I call bullshit on associate at PE shop.

In reply to baylormale
3/9/10
baylormale:

Aceman is right. You may work at a PE firm CompBanker, but you have no idea what is happening at a level above your spreadsheets. Don't comment if you don't know.

Why would you refer to getting technical? Don't know know PE is all about being technical? I call bullshit on associate at PE shop.

It is hard for me to take your points seriously if you just call me wrong and don't offer a competing viewpoint. Either way, I will defend myself with examples:

Case 1, Oaktree Principal Investment claims $7.6bn of Assets Under Management ("AUM")
http://www.oaktreecapital.com/strategies/principal...

OCM Principal Opportunities Fund V, L.P. - $1.0bn
OCM Principal Opportunities Fund IV, L.P. - $3.328bn
OCM Principal Opportunities Fund III, L.P. - $1.4bn
OCM Principal Opportunities Fund II, L.P. - $1.3bn
OCM Principal Opportunities Fund I, L.P. - $0.625bn

Case 2, Leonard Green Partners claims $9.0bn of equity capital under management.
http://www.leonardgreen.com/

Green Equity Investors V, L.P. - $5.3bn
Green Equity Investors IV, L.P. - $1.85bn
Green Equity Investors III, L.P. - $1.244bn
Green Equity Investors II, L.P. - $0.311bn
Green Equity Investors, L.P. - $0.216bn

Case 3, Charlesbank claims more than $2bn in assets, but their largest and most recent fund is only $1.5bn.
http://www.charlesbank.com/

Charlesbank Equity Partners VII, L.P. - $1.5bn
Charlesbank Equity Fund VI, L.P. - $1.0bn
Charlesbank Equity Fund III, L.P. - $0.59bn
Charlesbank Equity Fund II, L.P. - $0.3bn

And for the record, I sit on the Board of Directors of multiple of our portfolio companies and am involved in every decision that gets made at the Board level. As for the spreadsheets, I just call up bankers when I need a comp set run. Please take your negative attitude elsewhere.

CompBanker

3/10/10
3/10/10

Haha, damn, thanks for the insight CompBanker, ignore the wannabes

In reply to TheGame
3/10/10
TheGame:

OWNED

Now you look stupid dont you.

In reply to masterg
3/10/10
masterg:

Haha, damn, thanks for the insight CompBanker, ignore the wannabes

hahaha, damn, you're an idiot, thank you for playing.

In reply to CompBanker
3/10/10
CompBanker:
baylormale:

Aceman is right. You may work at a PE firm CompBanker, but you have no idea what is happening at a level above your spreadsheets. Don't comment if you don't know.

Why would you refer to getting technical? Don't know know PE is all about being technical? I call bullshit on associate at PE shop.

It is hard for me to take your points seriously if you just call me wrong and don't offer a competing viewpoint. Either way, I will defend myself with examples:

Case 1, Oaktree Principal Investment claims $7.6bn of Assets Under Management ("AUM")
http://www.oaktreecapital.com/strategies/principal...

OCM Principal Opportunities Fund V, L.P. - $1.0bn
OCM Principal Opportunities Fund IV, L.P. - $3.328bn
OCM Principal Opportunities Fund III, L.P. - $1.4bn
OCM Principal Opportunities Fund II, L.P. - $1.3bn
OCM Principal Opportunities Fund I, L.P. - $0.625bn

Case 2, Leonard Green Partners claims $9.0bn of equity capital under management.
http://www.leonardgreen.com/

Green Equity Investors V, L.P. - $5.3bn
Green Equity Investors IV, L.P. - $1.85bn
Green Equity Investors III, L.P. - $1.244bn
Green Equity Investors II, L.P. - $0.311bn
Green Equity Investors, L.P. - $0.216bn

Case 3, Charlesbank claims more than $2bn in assets, but their largest and most recent fund is only $1.5bn.
http://www.charlesbank.com/

Charlesbank Equity Partners VII, L.P. - $1.5bn
Charlesbank Equity Fund VI, L.P. - $1.0bn
Charlesbank Equity Fund III, L.P. - $0.59bn
Charlesbank Equity Fund II, L.P. - $0.3bn

And for the record, I sit on the Board of Directors of multiple of our portfolio companies and am involved in every decision that gets made at the Board level. As for the spreadsheets, I just call up bankers when I need a comp set run. Please take your negative attitude elsewhere.

oh my freaking lord, I get busy for a few days and when I come back what do I see? a bunch of idiots spewing false info and patting eachother on their backs, hey fools, congrats on being dumbasses. People are here to LEARN, so make an effort to check your info please. And when someone tells you you're wrong, you might want to educate yourself before making yourself look stupid.

First of all, don't waste my time with your so called "proof", just a quick glance at your "case 3" show me that you can't even add. Thank you for proving MY point.

So you want additional proof is that right? OH OK, well, where do I start?? HOW ABOUT THE LETTER A?? let me see, the FIRST firm i find, Abry Partners, let's see what they have. http://www.abry.com/Home/AboutUs/OurFunds.aspx

OK, 2.75 billlion AUM.

ABRY Broadcast Partners I 35 M
ABRY Broadcast Partners II 250M
ABRY Partners III 575M
ABRY Partners IV 750M
ABRY Partners V 950M
ABRY Partners VI 1350M

Ok, i'll let you practice a bit and let you add it all up, since you seem to have major issues with addition. I can tell you right now that NO IT DOES NOT EQUAL 2.75, it is MUCH BIGGER.

There. I just saved you your job. No i don't need you to thank me. Just stop wasting my time and go learn what AUM means.

3/10/10

wtf, half a year ago you asked this exact same question, and now you're suddenly the expert, aceman?
http://www.wallstreetoasis.com/forums/what-exactly...

not only do you not work in pe, i'm not so sure you even work in the industry.

and re: the abry example - they describe the 2.75 million as what is in their "active funds," not aum, total assets under management, total contributed capital, or anything like that. "We currently manage over $2.75 billion of capital in our active funds". It's all in how you word it.

3/11/10

i hope i never have to work with any of you

In reply to aardvarkaa
3/11/10
aardvarkaa:

wtf, half a year ago you asked this exact same question, and now you're suddenly the expert, aceman?
http://www.wallstreetoasis.com/forums/what-exactly...

not only do you not work in pe, i'm not so sure you even work in the industry.

and re: the abry example - they describe the 2.75 million as what is in their "active funds," not aum, total assets under management, total contributed capital, or anything like that. "We currently manage over $2.75 billion of capital in our active funds". It's all in how you word it.

WTF aardvark, my question half a year ago EXACTLY proves my point. The firm I worked for (not anymore) lists 1 billion invested, 300 M new fund. Guess what, I KNEW finding the AUM is not as easy as adding it all up, so i made the effort to go out and ACTUALLY LEARN THE STUFF.

WTF IS YOUR POINT? sneaking around and diggin stuff up? For what???
Since you're so damn smart, why dont you tell us what AUM is then? COMPBanker the fool says its just adding it all up, why dont you tell us if you agree??

3/11/10

Some firms list total historical AUM, some list current AUM. Current assets under management is probably the most useful metric because that tells you exactly how much capital the firm is working with right now. No one really cares what the AUM was in the 80's, for example, but if there were multiple funds raised in the past few years, that's relevant and important to know.

3/11/10

there's not really a clear definition like there is for, say, a hedge fund. When you see something listed in a publication like wsj (if it says X firm as $40B aum) that generally means every fund ever raised. A lot of the time firms will be more specific, though. Thats why the fund you are referencing split it up as invested and newly raised.

Most websites will break down every fund by size and vintage year. Sometimes they will state aggregate value of investments made, "active" capital, size of latest fund, or a number of other things. "Assets under management," when phrased in those exact terms, though, generally means the sum of every fund ever raised. That's why your counterexamples don't disprove anything - they aren't listing aum, but rather something else.

In reply to ews09
3/11/10
ews09:

Current assets under management is probably the most useful metric because that tells you exactly how much capital the firm is working with right now. No one really cares what the AUM was in the 80's

EXACTLY, thank you ews. That's what i've been trying to tell these people and I get flamed for trying to help.

3/11/10

Everyone who thinks Aceman is a douche say "aye"

3/11/10

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3/11/10

Aceman,

The original poster saw "AUM" in an article and wanted to understand what it meant. aardvarkaa and I pointed out that when a PE shop uses the term AUM they generally are referring to the aggregate asset value of all of their funds. I don't disagree with you that CURRENT AUM is a better metric to use when comparing the size of various PE shops, however, that was not the question being asked. I even pointed this out with the caveat that I was referring to someone browsing webpages looking to understand what the posted AUM means (see quote). Really not sure why you're jumping up and down about this.

CompBanker:

I suppose you could get technical and say AUM is "active" funds only, but that would be misleading for someone who was looking at websites and trying to determine size.

CompBanker

In reply to baylormale
3/11/10
baylormale:

Aceman is right. You may work at a PE firm CompBanker, but you have no idea what is happening at a level above your spreadsheets. Don't comment if you don't know.

Why would you refer to getting technical? Don't know know PE is all about being technical? I call bullshit on associate at PE shop.

Quite the hard ass... but I think you're right. Firms will also quote gross investments completed and this will include historical figures. AUM should be actual equity committed to the fund, either deployed (still active investments) or committed but undeployed. Some firms also measure the collective weight of the partners balls, multiply that by realized IRR in all prior funds then raise that to a power equal to average partner penis girth in centimeters... then they add that to the total.

In reply to TheGame
3/11/10
TheGame:

Aye

Wow....replying to your own message, you're even a bigger loser than i thought.

3/12/10

You should try replying to CompBanker's respectful and professional response...unless you have nothing to say at this point.

Thanks for nothing

3/12/10
aceman:

most of the talk has been around eating less or healthier....for me, I am a skinny person and its hard for me to gain weight. In fact I lose weight easily. I feel the most healthy when I work out + eat 5 times a day to maintain my weight.

so is it possible to eat 5 times a day in banking? Do they care if you eat while you're at your desk? Can you even go out and get food that's not lunch/dinner time?

By the way, the above quote is from last December. Clearly you are just another student cluttering up this board with your lack of knowledge. Try learning from people who actually know what they are talking about.

In reply to TheGame
3/12/10
TheGame:

You should try replying to CompBanker's respectful and professional response...unless you have nothing to say at this point.

Thanks for nothing

I did just reply to his post, maybe not immediately since other people like myself have important things to do AND have lives, apparently you do not.

This thread doesn't even concern you and here you are trying to flame other with absolutely juvenile comments. If you have nothing to add, I would suggest you get off the forum.

I don't have as much of a problem with compbanker as I have with your sorry self.

In reply to CompBanker
3/12/10
CompBanker:

Aceman,

The original poster saw "AUM" in an article and wanted to understand what it meant. aardvarkaa and I pointed out that when a PE shop uses the term AUM they generally are referring to the aggregate asset value of all of their funds. I don't disagree with you that CURRENT AUM is a better metric to use when comparing the size of various PE shops, however, that was not the question being asked. I even pointed this out with the caveat that I was referring to someone browsing webpages looking to understand what the posted AUM means (see quote). Really not sure why you're jumping up and down about this.

CompBanker:

I suppose you could get technical and say AUM is "active" funds only, but that would be misleading for someone who was looking at websites and trying to determine size.

OK, one last time. You seems a bit more reasonable now, so try to understand the logic here. AUM is used in a variety of different ways, and also interchangeably with a several others terms (capital managed, active funds, etc) Whether or not the terms are all used correctly is not the issue here.

Now, whether or not you agree, based on what i know (talking to and asking about AUM to countless PE professional, MDs, partners at top firms, taking advanced PE courses taught by MDs which discuss this EXACT AUM issue, completing modeling and calculation assignments on this EXACT issue) , the simple definition widely used in the industry is as follows:

AUM is funds committed minus funds exited

(sometimes with other more complicated calculations, based on fund terms, firm terms, LP terms, etc that's on a case by case basis and not worth gettin into here).

As many people have mentioned, "active funds managed" is BY FAR the most widely used compared to "total funds managed throughout history, even though some of it you're not managing anymore". Especially when most firms give you a list of past funds raised, there's pretty much no good reason to even use the latter definition. If you want to know the size of the firm, look at AUM or active funds managed (used interchangeably) if its listed, if not then look at the last couple of funds raised from the list of funds, if not then look at the target investment sizes, usually in the investment strategy section.

Hence, due to the vast popularity and common usage of my definition, along with the fact that its much more practical, wouldn't you say that is the default definition? This makes your definition the one that's misleading.

For the layman, my definition of AUM is much easier to understand as well. AUM = Assets under management = should be the things you're managing now. Why would you count it as AUM if you're not managing it, ie funds exited?? When you say how much money you have, do you say what you have right now, or every dollar you've ever owned in the past? Of course PE funds are a lot more complex, but like you said, this is targeting the layman who is looking for a simple definition or browsing through websites right? So my definition makes much more sense to them.

If you want to use examples, unless you can prove that EVERY single firm uses your definition only, then you're not proving anything. Because that's what you claimed in the very beginning right?

What I am jumping up and down about is not the fact that you disagree or offer another point of view, those are always welcomed. I am annoyed becuase here I am trying to teach people the right things, and your first reply post to me was basically tell me I am completely wrong and trying to prove yourself using a bunch of bad examples. You, my friend, are the one that is overreacting with your first reply to me. Go back and read your post if you don't think so.

The thing is, compbanker, it seems like you yourself realize that you're wrong, based on your later posts. Your later post suggest that you agree more with what I said. Now that's fine, but you can see why I find your first argument ridiculous in the beginning.

Also, idiots like aardvark, THE"lackof"GAME, masterg, and people like that jump on the thread and use juvenile terms like they're in third grade, have absolutely no value to add whatsoever, and for no reason start digging up peoples past posts. And obivously they know nothing about the topic at hand. That just pissed me off, idiots like that should be kicked off the forum. My anger is more directly toward those guys, not you. I find your first post somewhat insulting, but its those other guys that are really pissing me off.

3/13/10

Longest post ever^^^

3/17/10

One of the lamest arguments ever. And though I disagree with Aceman's style, he's right. AUM = funds committed minus funds exited. This is both the appropriate and most common usage of AUM for PE.

For most firms, his means adding up the latest 2-3 funds: the current fund being deployed, the last fund (likely fully deployed and actively managed), and maybe even the next prior fund (still managing legacy assets). Also, firms occasionally manage funds dedicated to other asset classes (mezz, real estate, venture, etc.) that they will include in AUM. Further complicating the matter -- some firms may include co-invest capital from LPs that's not included in committed capital but has found its way into completed deals (usually involving a big equity check outside of the fund's concentration limitatoins)..

And for the minority of firms that state their AUM as a historical aggregate of their funds, they're either being stupid or compensating for something.

3/17/10

Lets end it all with this:

aceman:

Hi all. I would like to know, if the VC/PE firm doesn't specify on its website, exactly how much assets they have under management. For example, if the firm says it "has invested 1 billion over since 1990", is that 1 billion AUM? I would think not because many of the investments have exited right? Those exited would not be counted towards AUM?

If it has raised a new 300 million fund, you just add it straight to the AUM?

Thanks.

You were asking this same question 6 months ago, now you're posing as if you're some sort of authority on the topic? Besides that, while you may be an MBA student (have 2-5 years work experience) its pretty obvious from your previous posts your actual real world finance/banking knowledge is very limited, if not non-existent.

The only person hyper-defensive and over-opinionated in this thread is you. I dont understand how you're "getting annoyed" because you're trying to teach people. It doesn't seem like you've worked in banking, much less PE a day in your life. What the fuck could you possibly have to teach anyone about real world banking/PE? You should leave that to the people who have actually worked in the industry. Because no matter how wrong someone else may be, they're wrong because they've seen it done that way and assumed that is the norm. You on the other hand, are "teaching" people your interpretation of what you heard someone else tell you.

The only thing you can authoritatively "teach" someone is how to get into whatever MBA program it is that you're in... that and maybe about computer science, laundromat management or rub and tug administration or whatever career you were in prior to b-school.

aceman:

This is actually for a class i'm taking.

What does 1 point in carry and 1 point in deal expenses mean? I know what carry is, but is 1 point like 1% or 0.1% or what? If so, what is it % of? What is the expense % out of?

Thanks.

aceman:

hey i got these questions for banking interviews, what are the answers? thanks.

1) Compare coca-cola and a shipbuilding company, which one has lower EV/ebitda?

2) You have company with the following: 100 EBIT, 20% tax, 40 capex, 15 depreciation, 10 change in WC. Currently the projection model is for 5 years out. Why is that not sufficient?

In reply to ibleedexcel
3/17/10
ibleedexcel:

One of the lamest arguments ever. And though I disagree with Aceman's style, he's right. AUM = funds committed minus funds exited. This is both the appropriate and most common usage of AUM for PE.

For most firms, his means adding up the latest 2-3 funds: the current fund being deployed, the last fund (likely fully deployed and actively managed), and maybe even the next prior fund (still managing legacy assets). Also, firms occasionally manage funds dedicated to other asset classes (mezz, real estate, venture, etc.) that they will include in AUM. Further complicating the matter -- some firms may include co-invest capital from LPs that's not included in committed capital but has found its way into completed deals (usually involving a big equity check outside of the fund's concentration limitatoins)..

And for the minority of firms that state their AUM as a historical aggregate of their funds, they're either being stupid or compensating for something.

Thank you ibleedexcel. I don't mind if people dont agree with my style, at least you are adding knowledge and not trolling like some others here.

In reply to Marcus_Halberstram
3/17/10

hey Marcus Halbertram, who are you to judge others? You have added no value whatsoever with your post. How the fuck do you know I didn't work in PE? What the heck are you doing anyway, digging around people's past posts like some loser with too much time on your hands. I might not be an "expert" on all of PE, but guess what, i sure am when it come to a simple topic like "what is AUM". You don't need to be an MD at Goldman Sachs to know the definition of investment banking.

Anyone who is knowledgeable has posted that they agree with my point. I dare you to focus on the topic or just STFU. Otherwise you're just a troll.

3/17/10

Aceman,

When you enter the real world you will quickly learn that theory and practice are two entirely different things. While I generally agree with your definition of AUM the more important issue is that finance is full of multiple interpretations, disclosures and asteriks. The fact that you've gotten so defensive calling out other people who are clearly more qualified and well-informed than you is kind of ridiculous.

In reply to junkbondswap
3/17/10
junkbondswap:

Aceman,

When you enter the real world you will quickly learn that theory and practice are two entirely different things.

I've been in the real world longer than you, my friend. You need to tell that to the other ignorant people on the forum, not me.

junkbondswap:

While I generally agree with your definition of AUM the more important issue is that finance is full of multiple interpretations, disclosures and asteriks.

Which is exactly the reason i am making my point, the fact that AUM is not as simple as adding up all historic funds.

junkbondswap:

The fact that you've gotten so defensive calling out other people who are clearly more qualified and well-informed than you is kind of ridiculous.

The qualified and well-informed people have agreed with my definition, which makes the people who continue to troll on this thread extremely ridiculous.

3/17/10

There have probably been 10 different people who have came on this thread posted one or two comments and then gone on their merry way... then there's you, who has been responding to each and every post and getting all worked up about it, nonetheless.

So who's the ridiculous one with too much time on his hands? There's not much too be proud about if you're 30-something years old and are arguing with a bunch of kids on an internet message board, who for the most part, seem to be far more mature (excluding myself, of course) and socially competent than you.

Most people lose the whole "ooohh ooooh... meee, meeee, meee" know it all mentality by the 2nd grade... others carry it well into their 30's.

aceman:

WRONG!! you're saying you work at a PE firm? let me guess, you haven't been there for long. jesus stop providing false information, i'm trying to help people out here, what YOU'RE saying is MISLEADING.

You're a buffoon... even a middle schooler would draw that conclusion.

Get a clue.

In reply to Marcus_Halberstram
3/17/10

Ha! i'm not the one talking crap about completely unrelated topics, making personal attacks for no reason, being a racist asshole, and being a prick overall. Since you are too much of a bitch to take on my dare to say something informative, you've once again proven yourself to be a troll.

I come here to discuss business and finance topics. You, on the other hand, spew useless crap on the internet. It may give you some temporary satisfaction, but doesn't change the fact that you're a loser in real life.

3/18/10

Dude aceman...you're getting worked here by Marcus. Your responses aren't even funny. Do yourself a favor and drop it. You look like a total clown.

In reply to TheGame
3/18/10

Dude, I am not trying to be funny. If I want to be funny i'd go elsewhere, not on some wall street forum.

Either way, Marcus's racist comments are not funny at all.

3/18/10

lol

this thread was a ray of light in an otherwise dark and gloomy day.

some bozo named aceman calling CompBanker and Marcus H, two of the most senior people on here, trolls

just savor the irony

5 dollars aceman goes to NYU

3/18/10

Concerning AUM, definitions vary, but I have noticed most small & mid-cap PE shops I worked with when I did M&A used CompBanker's definition.
But AUM are like league tables, its all about the foot notes...

Aceman, thank you for being so outrageously ridiculous, I had a really good laugh! Very entertaining.

(BTW, I don't think there is any gaap or ifrs definition of AUM, so there is no right answer)

3/18/10

Most funds will use whatever definition of AUM that looks the biggest (ie, the way CompBanker is defining it). Simple as that. Just the same way every bank manipulates the league tables in their favor.

3/18/10

Jeez....

I worked in PE in Europe and with PE in the USA and "AUM" in my opinion is a "blurry" marketing term since most firms will take into account only the active funds (generally the big players) and others will also include the amount of closed funds, like Compbanker demonstrates it.

> To answer the original topic I would just say as an advice to just do simple dilligence on the funds by looking of the amount raised by running a "news search" or on "merger market/ Capital IQ" if you have access.

> To Aceman, there is popular particularly appropriate to your case saying that says:

"Knowledge is like jam, the less you have, the more you have to spread it"

In reply to Machine
3/18/10

http://www.privateequitywire.co.uk/2010/02/25/3666...

AUM in KKR's public markets segment were USD13.4bn as of 31 December 2009, an increase of USD0.4bn or 3.3 per cent compared to pro forma AUM of USD12.9bn as of 30 September 2009. The increase was due primarily to new capital raised offset by distributions during the quarter.

http://www.preqin.com/item/private-equity-assets-r...

Stronger than expected fundraising during the year - with 776 direct funds raising a total of $562 billion - combined with a slowdown in distributions back to limited partners helped to increase the AUM globally.

Assets under management for the private equity industry are calculated as the equity value of existing companies in the portfolio plus commitments available to be called up (otherwise known as "dry powder").

http://www.investorglossary.com/assets-under-manag...

Assets under management equals the market value of portfolio assets owned by investors.

These definitions back by at least 10+ PE partners (yes i have talked to that many about this very topic), another 15 or so professionals who work in various PE firms, at least two PE classes on this EXACT topic of AUM, taught by one PE partner and the other by a PE industry research firm executive.

Compare this to the oppositions stuff like "well in my opinion" and "from what i've heard" bla bla bla.

I rest my case.

In reply to aceman
3/18/10
aceman:

http://www.privateequitywire.co.uk/2010/02/25/3666...

AUM in KKR's public markets segment were USD13.4bn as of 31 December 2009, an increase of USD0.4bn or 3.3 per cent compared to pro forma AUM of USD12.9bn as of 30 September 2009. The increase was due primarily to new capital raised offset by distributions during the quarter.

http://www.preqin.com/item/private-equity-assets-r...

Stronger than expected fundraising during the year - with 776 direct funds raising a total of $562 billion - combined with a slowdown in distributions back to limited partners helped to increase the AUM globally.

Assets under management for the private equity industry are calculated as the equity value of existing companies in the portfolio plus commitments available to be called up (otherwise known as "dry powder").

http://www.investorglossary.com/assets-under-manag...

Assets under management equals the market value of portfolio assets owned by investors.

These definitions back by at least 10+ PE partners (yes i have talked to that many about this very topic), another 15 or so professionals who work in various PE firms, at least two PE classes on this EXACT topic of AUM, taught by one PE partner and the other by a PE industry research firm executive.

Compare this to the oppositions stuff like "well in my opinion" and "from what i've heard" bla bla bla.

I rest my case.

YES! You're back for round 2!!!!

And here we all were wondering if you'd come back after making a complete arse of yourself. Let the games begin!

also...NYU?

In reply to Affirmative_Action_Walrus
3/18/10

It is the idiots who don't have the slightest idea what AUM is that are making complete arses of themselves. Not a single detractor has offered any evidence that suggest they have researched the topic in depth, spoken to any senior PE professionals, or even used any common sense.

3/19/10

Aceman is still listed as a "prospective monkey" and he has not really shown any hard evidence to support his case either. Note he is arguing against two certified users, meaning they are actually working in finance...

Finally, there is no strict definition of AUM. It is calculated in different ways by different firms. So aceman, pull the stick out of your ass, stop being so defensive, and just agree that there are different ways of computing AUM.

3/19/10

aceman, there are a number of people on this board, in fact, some who posted on this very thread, who work in PE and know what they're talking about. I have colleagues in PE as well, and I can say that from what I've seen and heard, PE firms vary in how they present AUM. Some will list "current AUM", some will list "total AUM", and others will list AUM since a specific time (i.e. $5 billion in committed capital since 2000).

What I don't understand is why you care so much. Seriously, who gives a damn whether a fund lists current or total AUM? Anyone with half a brain can research the firm and quickly see what year each fund was raised and the size of each fund.

3/19/10

By the way, staying in tonight and tomorrow night watching NCAAs...i can go all night and all day if you'd like.

In reply to Billy Ray Valentine
3/19/10
Billy Ray Valentine:

Aceman is still listed as a "prospective monkey" and he has not really shown any hard evidence to support his case either. Note he is arguing against two certified users, meaning they are actually working in finance...

Finally, there is no strict definition of AUM. It is calculated in different ways by different firms. So aceman, pull the stick out of your ass, stop being so defensive, and just agree that there are different ways of computing AUM.

Wrong. There are different ways to calculate sure. However there is one widely used, widely accepted, logical definition.

Why don't you tell the detractors to stop being so defensive. Guess who wrote "PE shops (including mine) always advertise the sum of all their funds as their AUM, even if the funds have since been liquidated."? Yes it is one of your "certified" finance superstars. Notice the use of the word "ALWAYS".

In reply to aceman
3/19/10
aceman:

It is the idiots who don't have the slightest idea what AUM is that are making complete arses of themselves. Not a single detractor has offered any evidence that suggest they have researched the topic in depth, spoken to any senior PE professionals, or even used any common sense.

It is absolutely crucial to know how to calculate AuM if you want to break into PE and make a good investments.

on a side note:

"AuM" per CompBanker tells you how much fund has been raised in the past on an aggregate basis,

"AuM" per aceman tells you how big the current portfolio is, at COST. It doesn't really tell you about the current size of your investments unless you mtm them. but then you can't really mtm investments unless you exit

but then as posters above mentioned Aum is basically like league table, i.e. it's not important

In reply to aceman
3/19/10
aceman:

By the way, staying in tonight and tomorrow night watching NCAAs...i can go all night and all day if you'd like.

YES

please do

you are a super ninja

In reply to Affirmative_Action_Walrus
3/19/10

Ha! yes i will be available to entertain you guys for another day and a half.

In reply to aceman
3/19/10

ok

tell us all again how stupid compbanker is

3/19/10

As opposed to going out with all of your friends? Oh wait.....

In reply to aceman
3/19/10
aceman:

By the way, staying in tonight and tomorrow night

as if we hadn't already guessed.

3/19/10

what a great read :-) please keep it up

3/19/10

HA! Marcus Hablablalba and The"Lackof"Game back again for more.

Maybe you guys stare at financial models all day and have no idea what's going on in the sports world, maybe you don't even know what basketball or march madness is, but other people in this world have interests other than excel.

3/19/10
In reply to aceman
3/19/10
aceman:

HA! Marcus Hablablalba and The"Lackof"Game back again for more.

Maybe you guys stare at financial models all day and have no idea what's going on in the sports world, maybe you don't even know what basketball or march madness is, but other people in this world have interests other than excel.

Congrats on your EXCITING life. I am sure everyone here thinks you are cool and wants to live your life. Seriously, you are a fucking annoying idiot.

In reply to TheGame
3/19/10
In reply to Advisory88
3/19/10

Advisory:

The rest of the country is doing exactly what i'm doing, get a fucking clue.

3/19/10

I must admit, however, I am a bit surprised to see two of the most respected users on here wasting their time on this idiot. A bit unexpected...

5/18/11

Compbanker is wrong and aceman is wrong if he means to carry investments at cost - rules were changed with FAS157, (before at cost was the practice, which actually made compbanker and aceman's numbers fairly similar except for older firms with many exited investments).

The AUM should be the carrying value of all the firms investments based on FAS157 (current values, not the original investment) plus any dry powder. Basically, it should be the sum of the "total assets" value from all the funds accounting statements (assuming the fund's have no significant liabilities, which is usually the case, if not, you may need to adjust). This is correct, since "assets" has an accounting definition last I checked. Whatever marketing bullshit your or other funds may use is irrelevant. I've seen a bajillion things done. Some even go so far as to include levered capital in their AUM (i.e. they buy a company but borrow $80M, but because they control the company they count the $80M as AUM). Others will just mention historical amounts raised, which is a bullshit useless number. None of those numbers are meaningful. My definition for AUM is meaningful because it's literally: if the fund liquidates tomorrow (assuming no slippage due to illiquidity), what is the value of the investments and callable capital (i.e. what are the fund's assets worth, aka assets under management)?

This is how LPs always asked for AUM to be reported in all the questionnaires I ever filled out, and I worked in PE too. Initial fund sizes were a different question, so they were definitely not asking for that.

Also, and quite importantly, my definition allows for comparison to all other fund types, whether they be mutual funds, hedge funds, etc. Just because the press or the marketing departments of certain funds may do things wrong, doesn't mean we should join them in their malpractice.

Consultant to a Fortune 50 Company

5/18/11

And to answer the OPs question. The fund had $400M value in it's current fund, and has just closed on a new fund of $1.1B. The firm's AUM is now $1.5B. This AUM will change as the companies they invest in grow or they raise new funds (or raise more money for existing funds, assuming they're allowed to). AUM will go down as they exit investments and return money to LPs or if their active investments go down in value. The AUM, as reported to LPs, will thus change over time.

Some, like CompBanker, will report that the firm's AUM is $1.5B for the entire duration, despite every financial statement they send to LPs indicating otherwise (and apparently he is a mega baller in PE, so woe to me for thinking he could possibly be wrong...)

Consultant to a Fortune 50 Company

In reply to Billy Ray Valentine
5/18/11
Billy Ray Valentine:

Aceman is still listed as a "prospective monkey" and he has not really shown any hard evidence to support his case either. Note he is arguing against two certified users, meaning they are actually working in finance...

Finally, there is no strict definition of AUM. It is calculated in different ways by different firms. So aceman, pull the stick out of your ass, stop being so defensive, and just agree that there are different ways of computing AUM.

Billy Ray! How you been man? Enjoying the yacht you bought with all your orange juice money?

Anyway, I'm also a certified user who worked in PE and I basically agree with aceman (see my posts above), so your logic is no more! I think his hard evidence was his citing actual articles that had definitiions that agreed with him. Compbanker just linked to web pages (one of which did contradict him - because why would you say over $2B AUM when you could have said over $3B?). I think aceman won fair and square, although a tad petulant at times (but so were some of his detractors).

Consultant to a Fortune 50 Company

In reply to aardvarkaa
5/18/11
aardvarkaa:

there's not really a clear definition like there is for, say, a hedge fund. When you see something listed in a publication like wsj (if it says X firm as $40B aum) that generally means every fund ever raised. A lot of the time firms will be more specific, though. Thats why the fund you are referencing split it up as invested and newly raised.

Most websites will break down every fund by size and vintage year. Sometimes they will state aggregate value of investments made, "active" capital, size of latest fund, or a number of other things. "Assets under management," when phrased in those exact terms, though, generally means the sum of every fund ever raised. That's why your counterexamples don't disprove anything - they aren't listing aum, but rather something else.

Actually, you better bet there is a clear fucking definition, read a fund's Limited Partnership Agreement. It will usually be called "Net Asset Value" or "Partnership Net Assets". Don't say there is not a clear definition when there is one. Hedge funds, mutual funds, private equity funds, etc. will all have a very clear definition.

The reason the press often goes by the shorthand and just says how much was raised is because they are not LPs, don't know the correct number, and they feel like they have to put SOMETHING. This is not the real AUM though, it's the total amount of capital contributions. They don't care to point this out, but doesn't mean it's right.

When you send an investor questionnaire to a prospective LP, you will list the fund size, vintage year, all the investments at cost, dry powder remaining, exited investments and the value, capital returned to LPs, and the current AUM as per the latest FAS157.

Assets under management would legally mean the Partnership Net Assets of every fund currently under the control of the private equity firm. This is the legally correct definition, per the firm's very own partnership agreements. There is NO other correct answer. We, the press, or marketing departments may cite the total amount raised, but I guarantee you this is wrong. Also, please note that not all PE firms will report an incorrect number in their press releases (mine didn't).

The correct answer DID change with the introduction of FAS157, because that changed the accounting rules and as such impacted the calculation of the value of the Partnership Net Assets. Before this change, because investments were usually carried at cost, the amount raised was usually not too different from the AUM (as long as not too many exits), so that's why it was a convenient short-cut. With firms that have been around for a long time, the usefulness of that shortcut, even before the advent of FAS157, was dubious.

Consultant to a Fortune 50 Company

5/19/11

alexpasch,

I don't disagree with anything you wrote: the technical definition of AUM would be the equity holding value of the entire portfolio, which is subject to change based on portfolio performance and carrying cost. However, I still stand by my comment that for the OP's purpose (to understand what was used in online articles), the best definition is the aggregate capital commitments of all funds. I think you even agree with this based on the following quote from you:

alexpasch:

The reason the press often goes by the shorthand and just says how much was raised is because they are not LPs, don't know the correct number, and they feel like they have to put SOMETHING. This is not the real AUM though, it's the total amount of capital contributions. They don't care to point this out, but doesn't mean it's right.

If the OP had gotten his hands on some of the reports put out to LPs rather than media releases, this would be a very different discussion. It's also worth nothing that since LPs are fund specific (unless you have the exact same LP base across all funds), any time you report out to LPs you are likely reporting out on a single fund rather than the collection of funds. I can't think of a time when you'd ever report your aggregate AUM across all funds (using the methodology you described) unless you were out fundraising.

CompBanker

In reply to CompBanker
5/19/11

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Consultant to a Fortune 50 Company

5/19/11
In reply to CompBanker
5/21/11

If the glove don't fit, you must acquit!

5/21/11

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