Analyzing Various Elements Impacting AUM Growth

AUM, or Assets Under Management, stands as a pivotal metric reflecting a company’s success and the trust investors place in its capabilities. However, gaining a nuanced understanding of the factors influencing AUM growth is imperative for strategic planning and informed decision-making. This article delves into the multifaceted elements impacting AUM growth and dissects their significance.

Investors are constantly looking for returns that are adjusted for risk. Sustained positive performance not only draws in new investors but also maintains the loyalty of existing ones. A history of providing dependable and competitive returns plays a crucial role in fostering AUM growth, as satisfied clients are more likely to expand their investments and speak positively about the firm.

In the exuberance of bull markets and favorable economic conditions, investor confidence skyrockets, resulting in increased investment inflows. On the other hand, during bear markets or economic downturns, AUM growth may stagnate or decline as investors adopt a more cautious approach. Managers who demonstrate expertise in navigating complex market conditions and achieving positive outcomes are better positioned to draw in and retain investors.

Abhay Bhutada, Poonawalla Fincorp‘s MD, anticipates a significant growth of 35-40 percent in their assets under management (AUM). As of July 2023, their current AUM is Rs 17,776 crore. Their confidence in achieving substantial growth is grounded in factors like identifying extensive market opportunities within their segment, having ample capital, and maintaining low leverage.

An intelligently executed marketing campaign has the potential to effectively showcase a firm’s unique value proposition and capture the attention of potential investors. Furthermore, strategic partnerships with financial advisors or institutions and a robust distribution network can broaden the client base. This helps in fortifying AUM growth.

Harshvardhan Lunia, CEO and founder of Lendingkart, said that their leadership team has effectively steered the company towards growth. Acknowledging the need to maintain this momentum, they understand the significance of embracing change. This entails diversifying their product portfolio, augmenting their assets under management (AUM), and improving disbursements, all while ensuring profitability. In pursuit of these goals, they firmly believe that ongoing evolution is essential and are motivating their key personnel to undertake more substantial challenges.

The standing and brand identity of a company plays a pivotal role in attracting investors. A robust reputation based on transparency, integrity, and a track record of success fosters trust, making clients more inclined to entrust their assets to the firm. Conversely, negative publicity or involvement in scandals can lead to a loss of clients, impeding the growth of assets under management. Therefore, safeguarding a positive image is essential for fostering continual AUM growth and sustaining investor confidence.

Providing excellent customer service and maintaining robust client relationships is integral to AUM growth. Satisfied clients are more likely to expand their investments and recommend the firm, thereby boosting organic growth. Conversely, dissatisfied clients may withdraw their investments, posing a potential impediment to AUM growth.

Take Poonawalla Fincorp Ltd’s Q1FY24 performance as an example. Under the guidance of Abhay Bhutada, the company made a commendable 41% YoY and 10% QoQ increase in AUM to ₹17,776 crore. This can be attributed to their digital-led customer-centric approach.

While investment performance remains a cornerstone, the significance of marketing strategies, client relationships, and brand reputation cannot be overstated. The interplay between market conditions, regulatory environments, and macroeconomic factors further shapes AUM growth trajectories. Fund managers and investment firms should carefully evaluate and prioritize these elements to craft effective growth strategies, ensuring their resilience in an ever-changing financial scenario.