What it means
The distinction that matters is control. Assets under management means the firm chooses the investments and is paid for that judgement, whereas assets under administration means the firm keeps the records straight and is paid for the service.
A single business can report both, and the two figures should never be added together carelessly because some assets appear in each. Fee levels follow directly from that difference.
Administration is a processing business charged in a few basis points, one basis point being 0.01%, while management is a judgement business charged in tens or even hundreds of basis points. A firm with a very large AUA and a modest AUM can still earn most of its revenue from the smaller managed pool.
Because margins are thin, the economics of administration are all about scale and automation. Fixed costs in technology, compliance and operations are heavy, so each additional billion dollars administered on the same platform is highly profitable.
That is why the custody and fund administration sectors have consolidated steadily into a small number of very large providers. AUA moves for reasons that have nothing to do with performance.
Market values rise and fall, clients transfer portfolios in or out, and winning a single institutional mandate can add tens of billions overnight. Reading a rise in AUA as evidence of a better business is a common mistake; net new assets and revenue per dollar administered tell you far more.
The measure also has practical uses beyond marketing. Regulators, rating agencies and prospective clients use it as a proxy for operational scale and resilience, and institutional buyers often set minimum AUA thresholds before they will even consider a provider.
Definitions vary between firms, so comparisons require reading the footnotes about what is included.
In practice
Real-world examples.
Example
A global custodian reports assets under administration in the hundreds of billions of dollars across pension funds and insurers. It makes no investment decisions at all, providing safekeeping, settlement and valuation reporting. Its revenue comes from tiny fee rates applied to very large balances.
Example
An adviser platform holds $12,000,000,000 of client portfolios, of which $2,000,000,000 sits in its own model portfolios. It reports the first number as AUA and the second as AUM. Analysts watch the conversion rate between the two as a key growth measure.
Example
A fund administrator services 90 boutique investment funds, calculating daily net asset values and handling investor registers. It charges roughly 2 basis points on the assets administered plus fixed fees per fund. Winning one large client can move its AUA by billions without changing headcount much.
Formula
Calculation
Administration Fee Revenue = Assets under Administration x Fee Rate
Windermere Platform Services administers $12,000,000,000 of client assets at an average administration fee of 3 basis points, which is 0.03%, or 0.0003 as a decimal. Within that total, $2,000,000,000 is also managed by the firm's own investment team at a management fee of 60 basis points, or 0.6%.
Administration revenue = $12,000,000,000 x 0.0003 = $3,600,000.
Management revenue = $2,000,000,000 x 0.006 = $12,000,000.
Total revenue = $3,600,000 + $12,000,000 = $15,600,000.
The illustration makes the economics clear. The managed pool is one sixth the size of the administered pool but produces more than three quarters of the revenue, which is why platforms with enormous AUA figures work hard to convert a slice of it into assets under management.Case study
Seen in the real world.
Windermere Custody Services is an illustrative, fictional administrator created to show how the measure drives strategy. It administered $6,000,000,000 of client assets at an average fee of 4 basis points, producing $6,000,000,000 x 0.0004 = $2,400,000 of annual revenue against a largely fixed cost base.
The business then won a single institutional mandate worth $500,000,000, priced keenly at 2 basis points because the client was large and sophisticated. That added $500,000,000 x 0.0002 = $100,000, taking revenue to $2,500,000 on AUA of $6,500,000,000. The blended fee rate fell to $2,500,000 / $6,500,000,000, or about 3.85 basis points.
The board initially celebrated the headline growth in AUA, then noticed the falling blended rate and asked the more useful question: does each new mandate cover its own marginal operating cost? In this illustrative case the answer was yes, because the new client ran on the existing platform, but the episode changed how the firm reported its numbers, adding revenue per dollar administered alongside the headline total.
Watch out
Common mistakes.
- Adding assets under administration and assets under management together to claim a larger total, when the same assets frequently appear in both figures.
- Reading a rise in AUA as improved performance, when market movements and a single new mandate can swamp everything the firm actually did.
- Assuming administered assets carry the same fee potential as managed assets, when the rates differ by a factor of ten or more.
Questions
People also ask.
Is AUA the same as AUM?
No, AUA covers assets the firm services operationally without discretion, while AUM covers assets where the firm makes the investment decisions and charges accordingly.
Why do firms publicise AUA at all?
It signals operational scale, stability and the ability to service large clients, and many institutional buyers set minimum thresholds before shortlisting a provider.
Can the same assets be counted by two different firms?
Yes, a custodian and a fund administrator can both report the same underlying portfolio, which is why industry totals cannot simply be summed.
From the founder's library
Take it further with the book.
Build your financial confidence beyond this definition. Shihan's full-length guide, Accounting Fundamentals, takes the same plain-English approach and turns it into a complete, practical playbook for non-finance managers, business owners and students - with chapter-end quiz answers and presentation slides included.
25% off with code MMHQ25, applied at checkout. Priced in USD - checkout may show the equivalent in your local currency.
View the book and save 25%Related