"Hey, guy in the convertible red Porsche! Yeah, you. How large is your um... asset?" Oh, sorry. Okay..okay...you knew we'd go there. Duh.
ASSET SIZE refers to the dough under management in an investment or asset management company. Like...how much money is this company managing? And it matters a tonne (trying to go all metric here). Why? Because a decent rule of thumb in calculating fees is to start with 1% as the "average management fee" for larger investment companies, trading public stocks. Earlier breakpoints in fees are higher...many start out at 2% but by the time the fund has $10 billion in assets or something gargantuan, the marginal fee might be 0.6% or less.
So if a $10 billion fund has an average fee of 1%, that fund is making $100 million a year in revenues. For the dozen people making investment decisions and the 40 in the back office, it's a really sweet gig. They can probably all afford those red Porsches. But they don't need to buy them. For reals.
Related or Semi-related Video
Finance: What is a Diversified Mutual Fu...20 Views
finance a la shmoop what is a diversified mutual fund? all right people
listen up it's lots of investments stocks bonds exposure to risk and reward [Risk and reward punch man in face]
everywhere energy, telecom, insurance, real estate, banking, chemicals, tech, retail not
enough diversity yet well those are just sectors or industries and there's a
whole bunch of them what about geography geographic diversity the US, Russia, China
Europe someday maybe Mars Elon what do you think well maybe exposures to [Elon Musk floating in space]
different currencies or commodities cycles as the diversity you seek hmm
well that's diversity Benetton eat your heart out so the bigger question is why
would you want such diversity? well the idea is that you mitigate risk by being
diverse the don't put all your eggs in one basket thing if one investment goes [Value of investment graph appears]
bust well at least you have plans B C and D to fall back on and if this is
grabbing you check out our videos on efficient markets theory for more on the
subject or maybe diversify your knowledge and watch all of our finance
videos food for thought and you know please click on the ads that we got to [Man holding begging sign]
eat around here
Up Next
What are Assets Under Management? The assets under management figure is the market value of all of the investment assets that a financial instituti...
What are mutual funds? Mutual funds are an aggregation of stocks, professionally managed for a "small" fee. Investors wanting exposure to a given a...
What are the different types of mutual funds? There are many different types of mutual funds, including bond funds, equity funds, money market fund...
How do you judge the performance of an index fund? For index funds, they're really just a reflection of the stocks and bonds they, uh... reflect. S...