Asset manager AUM and fee economics model
AUM roll-forward, flows, fee rates, margin, P/E and DCF. Build an asset manager from its assets: an AUM roll-forward by product with flows, markets and distributions kept apart, management fees on average AUM at compressing fee rates, probability-weighted performance fees, costs split into a compensation ratio and fixed costs, operating leverage made explicit, EPS after buybacks, and a value per share on P/E, EV/EBITDA and a DCF of the fee stream.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: asset manager aum and fee economics model.Updated 30 October 2026
Who builds it, and for whatThe model an analyst builds for a listed asset manager: in equity research to forecast revenue from AUM and fee rates, in a financial institutions group to value a manager for a merger or a stake sale, and in private equity to judge what a wealth or alternatives platform could earn. It answers how much of AUM growth is the manager’s own, what the fee mix and fee compression do to revenue, how far margin moves when markets do, and what the earnings are worth.
Every sheet below, in your browser, with its outputs and checks
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| A | B | C | D | E | F | G | H | I | J | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Assumptions | |||||||||
| 2 | AUM in $bn; money in $m unless stated. FY0A is the last actual year; the forecast runs FY1E to FY5E. Every figure is invented for teaching. | |||||||||
| 4 | Year | Unit | FY0A | FY1E | FY2E | FY3E | FY4E | FY5E | Notes | |
| 5 | Year number | # | 0 | 1 | 2 | 3 | 4 | 5 | FY0A = 0. Drives cost growth, fee compression and discounting. | |
| 7 | Scenario | |||||||||
| 8 | Scenario | # | 1 | 1 = base, 2 = upside, 3 = downside. Moves net flows, market returns and fee compression in FY1E to FY5E. | ||||||
| 9 | Net flows, upside adjustment | pp | 2.0% | Added to every product’s net flow rate when Scenario = 2. | ||||||
| 10 | Net flows, downside adjustment | pp | -4.0% | Added when Scenario = 3: clients withdraw in a falling market. | ||||||
| 11 | Market return, upside adjustment | pp | 2.0% | |||||||
| 12 | Market return, downside adjustment | pp | -8.0% | |||||||
| 13 | Fee compression, upside multiplier | x | 0.5x | Scales every product’s yearly compression when Scenario = 2. The base case is 1.0x. | ||||||
| 14 | Fee compression, downside multiplier | x | 2.0x | |||||||
| 16 | AUM by product | |||||||||
| 17 | Equities: AUM, FY0A | $bn | 120.0 | |||||||
| 18 | Equities: net flows, % of opening AUM, base | % | -3.0% | -3.0% | -3.0% | -3.0% | -3.0% | |||
| 19 | Equities: market return, base | % | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% | Earned on opening AUM plus half the year’s flows. | ||
| 20 | Equities: distributions, % of opening AUM | % | 1.0% | Income and realisations paid out of the funds to clients. | ||||||
| 21 | Fixed income: AUM, FY0A | $bn | 90.0 | |||||||
| 22 | Fixed income: net flows, % of opening AUM, base | % | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | |||
| 23 | Fixed income: market return, base | % | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | |||
| 24 | Fixed income: distributions, % of opening AUM | % | 2.0% | Income and realisations paid out of the funds to clients. | ||||||
| 25 | Multi-asset: AUM, FY0A | $bn | 50.0 | |||||||
| 26 | Multi-asset: net flows, % of opening AUM, base | % | 0.0% | 0.0% | 0.0% | 0.0% | 0.0% | |||
| 27 | Multi-asset: market return, base | % | 4.5% | 4.5% | 4.5% | 4.5% | 4.5% | |||
| 28 | Multi-asset: distributions, % of opening AUM | % | 1.5% | Income and realisations paid out of the funds to clients. | ||||||
| 29 | Alternatives: AUM, FY0A | $bn | 25.0 | |||||||
| 30 | Alternatives: net flows, % of opening AUM, base | % | 8.0% | 8.0% | 8.0% | 8.0% | 8.0% | |||
| 31 | Alternatives: market return, base | % | 5.0% | 5.0% | 5.0% | 5.0% | 5.0% | |||
| 32 | Alternatives: distributions, % of opening AUM | % | 5.0% | Income and realisations paid out of the funds to clients. | ||||||
| 33 | Cash and ETFs: AUM, FY0A | $bn | 65.0 | |||||||
| 34 | Cash and ETFs: net flows, % of opening AUM, base | % | 6.0% | 6.0% | 6.0% | 6.0% | 6.0% | |||
| 35 | Cash and ETFs: market return, base | % | 3.0% | 3.0% | 3.0% | 3.0% | 3.0% | |||
| 36 | Cash and ETFs: distributions, % of opening AUM | % | 0.5% | Income and realisations paid out of the funds to clients. | ||||||
| 38 | Fees | |||||||||
| 39 | Equities: management fee, FY0A | bp | 55.0 | Annual fee on average AUM. | ||||||
| 40 | Equities: fee compression, base | bp a year | 1.0 | Taken off the fee rate every year: competition and the shift to passive. | ||||||
| 41 | Fixed income: management fee, FY0A | bp | 25.0 | Annual fee on average AUM. | ||||||
| 42 | Fixed income: fee compression, base | bp a year | 0.4 | Taken off the fee rate every year: competition and the shift to passive. | ||||||
| 43 | Multi-asset: management fee, FY0A | bp | 45.0 | Annual fee on average AUM. | ||||||
| 44 | Multi-asset: fee compression, base | bp a year | 0.8 | Taken off the fee rate every year: competition and the shift to passive. | ||||||
| 45 | Alternatives: management fee, FY0A | bp | 95.0 | Annual fee on average AUM. | ||||||
| 46 | Alternatives: fee compression, base | bp a year | 1.0 | Taken off the fee rate every year: competition and the shift to passive. | ||||||
| 47 | Cash and ETFs: management fee, FY0A | bp | 10.0 | Annual fee on average AUM. | ||||||
| 48 | Cash and ETFs: fee compression, base | bp a year | 0.2 | Taken off the fee rate every year: competition and the shift to passive. | ||||||
| 49 | Performance fees available, % of average alternatives AUM | % | 0.6% | What the funds would pay if every one cleared its hurdle. | ||||||
| 50 | Probability-weighted share earned | % | 50.0% | The haircut: performance fees are uncertain, so only a share is forecast. | ||||||
| 51 | Other revenue, FY0A | $m | 120.0 | Platform, advice and securities lending income. | ||||||
| 52 | Other revenue, growth | % | 3.0% | |||||||
| 54 | Costs and tax | |||||||||
| 55 | Compensation ratio, % of revenue | % | 40.0% | Salaries and the bonus pool, which moves with revenue. | ||||||
| 56 | Non-compensation fixed costs, FY0A | $m | 380.0 | Technology, data, premises and the rest of the platform. | ||||||
| 57 | Non-compensation fixed cost growth | % | 2.5% | |||||||
| 58 | Distribution and fund administration costs | bp of AUM | 1.5 | Platform fees, custody and administration, on average AUM. | ||||||
| 59 | Depreciation and amortisation, % of revenue | % | 2.0% | |||||||
| 60 | Capital spending, % of revenue | % | 2.0% | |||||||
| 61 | Interest on cash | % | 3.5% | On opening cash. | ||||||
| 62 | Tax rate | % | 24.0% | |||||||
| 64 | Capital return and balance sheet | |||||||||
| 65 | Cash, FY0A | $m | 800.0 | |||||||
| 66 | Seed and co-investments | $m | 300.0 | Held flat. Money placed in the firm’s own funds to launch them. | ||||||
| 67 | Goodwill and intangible assets | $m | 1,200.0 | Held flat. | ||||||
| 68 | Other net operating assets | $m | 200.0 | Held flat. | ||||||
| 69 | Shares in issue, FY0A | m shares | 250 | |||||||
| 70 | Earnings per share, FY0A | $ per share | 1.70 | |||||||
| 71 | Dividends, % of net income | % | 50.0% | |||||||
| 72 | Buybacks, % of net income | % | 30.0% | |||||||
| 73 | Buyback price, multiple of last year’s EPS | x | 14.0x | An illustrative input: the price the shares are assumed to trade at. | ||||||
| 75 | Valuation | |||||||||
| 76 | Peer P/E, low | x | 11.0x | On forward earnings. An illustrative range for listed traditional managers. | ||||||
| 77 | Peer P/E, mid | x | 13.0x | |||||||
| 78 | Peer P/E, high | x | 15.0x | |||||||
| 79 | Peer EV/EBITDA, low | x | 7.0x | |||||||
| 80 | Peer EV/EBITDA, mid | x | 8.5x | |||||||
| 81 | Peer EV/EBITDA, high | x | 10.0x | |||||||
| 82 | Risk-free rate | % | 4.2% | |||||||
| 83 | Equity beta | β | 1.30 | High: revenue moves with the market twice over, through AUM and through flows. | ||||||
| 84 | Equity risk premium | % | 5.5% | |||||||
| 85 | Terminal growth | % | 2.0% | Growth in free cash flow after FY5E. Must be below the discount rate. | ||||||
Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.
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Asset manager AUM and fee economics model: the workbook
An Excel workbook with working formulas, no macros and no external links: the same model you can work with on this page.
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- The worked model
- 9 sheets and 873 live formulas, all 4 schedules built and linked, every check reading zero. Change an input in Excel and the whole model moves.
- The starter
- The same inputs and layout with the aUM roll-forward: flows, markets and distributions left blank for you to build, each blank cell marked. The worked model is its answer.
What the base case says
- Closing AUM, FY1E ($bn)
- 363.24
- Organic growth, FY1E
- 0.9%
- Blended fee rate, FY1E (bp)
- 39.63
- Revenue, FY1E
- $1,615.1m
- Operating margin, FY1E
- 32.6%
- Operating margin, FY5E
- 32.1%
- EPS, FY1E ($)
- 1.70
- Value per share, mid P/E ($)
- 22.13
- Value per share, mid EV/EBITDA ($)
- 23.39
- Value per share, DCF ($)
- 21.47
Read from the workbook as served, every input at its default. Periods: FY0A, FY1E, FY2E, FY3E, FY4E, FY5E. The figures are invented and move with whatever you type in.
What this model is
A five-year model (FY1E to FY5E, from an FY0A actual year) of a listed asset manager running equities, fixed income, multi-asset, alternatives and cash and ETF products, built from the assets it manages rather than from a revenue growth rate.
It runs from an AUM roll-forward by product (net flows, market performance and distributions kept apart), to management fees on average AUM at fee rates that compress every year, performance fees weighted by their probability and other revenue; then to a compensation ratio and mostly fixed other costs, operating margin and operating leverage made explicit, net income, and EPS after buybacks. It is valued on forward P/E against a peer range, on EV/EBITDA and by a DCF of the fee stream. Set Scenario on the Assumptions sheet to 2 (upside) or 3 (downside).
Revenue is a fee on someone else’s money. A manager grows when clients give it more (net flows) and when markets lift what it already runs (market performance). Only the first is the manager’s doing, which is why analysts look through AUM growth to organic growth.
The fee rate matters as much as the assets. An alternatives fund may charge ten times what an index fund does, so a shift in mix moves the blended fee rate as surely as compression within a product, and the Revenue sheet shows both.
Most costs do not move with AUM. When markets rise, revenue rises and margin rises faster; when they fall, margin falls faster too. The P&L sheet shows that operating leverage year by year, and the Sensitivity sheet shows margin across flows and fee compression.
Seats: Equity research and hedge funds, Investment banking, Private equity.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
AUM roll-forward: flows, markets and distributions
Opening, net flows, market moves, distributions, closing
Assumptions, rows 17–36 · AUM, rows 6–7 · AUM, rows 10–17 · AUM, rows 20–27 · AUM, rows 30–37 · AUM, rows 40–47 · AUM, rows 50–57 · AUM, rows 60–70
Asset manager fee economics and operating leverage
Fee rates, compression, performance fees, margin
Assumptions, rows 39–52 · Assumptions, rows 55–62 · Revenue, rows 6–11 · Revenue, rows 14–18 · Revenue, rows 21–29 · Revenue, rows 32–36 · P&L, rows 6–16 · P&L, rows 19–24
Asset manager valuation: P/E, EV/EBITDA and DCF
Forward multiples against peers, and the fee stream
Assumptions, rows 76–85 · Valuation, rows 6–9 · Valuation, rows 12–16 · Valuation, rows 19–36
Sensitivity tables
Two assumptions at once, without a data table
Sensitivity, rows 5–7 · Sensitivity, rows 10–15 · Sensitivity, rows 18–25 · Sensitivity, rows 28–52
What you should be able to explain
- Why AUM growth is two things, net flows and market performance, and why analysts care most about the first: organic growth.
- How the blended fee rate falls through compression within products and through a shift in mix towards cheaper ones.
- Why performance fees are valued below management fees: they depend on returns no one can promise, so they are forecast at a probability.
- How a compensation ratio and fixed costs give an asset manager operating leverage, so margin moves faster than the market in both directions.
- Why a DCF of the fee stream is a fair method for an asset manager when it is not for a bank or an insurer.
What a reviewer looks for
- Forecasting revenue from a growth rate, so markets, flows and fee rates cannot be told apart.
- Charging fees on closing rather than average AUM, which overstates revenue in a rising year.
- Treating every cost as a share of revenue, which hides the operating leverage that makes managers cyclical.
- Booking performance fees at their full potential every year.
- Ignoring the shift in mix, so the blended fee rate holds up while every product’s fee is falling.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Annual periods. FY0A is the last actual year; the forecast runs FY1E to FY5E. AUM is in $bn and money in $m, so a fee is average AUM x basis points / 10,000 x 1,000.
- Each product’s AUM rolls forward: opening, plus net flows at a rate of opening AUM, plus market performance on opening AUM and half the year’s flows, less distributions at a rate of opening AUM. Fees are charged on the average of opening and closing AUM.
- Each fee rate falls by its compression every year, scaled by the scenario. Performance fees are a rate on average alternatives AUM times the probability they are earned. Other revenue grows at its own rate.
- Compensation is a ratio of revenue. Non-compensation costs are fixed costs growing at their own rate plus distribution and administration costs in basis points of average AUM. Depreciation sits inside the fixed costs; capital spending equals it in the base case.
- Interest is earned on opening cash, and buybacks are priced at an assumed multiple of last year’s EPS, so nothing is circular. The model carries no debt; cash builds from what is not paid out.
- Valuation date is the end of FY0A. P/E and EV/EBITDA are on FY1E. The DCF discounts free cash flow (operating income after tax, plus depreciation, less capital spending) at the cost of equity from each year end, with a perpetuity growth terminal value; cash and seed investments are added to reach equity.
- The sensitivity grids move every product’s net flow rate by the same amount in every forecast year (the row axis shows the resulting FY1E organic growth) and rebuild AUM product by product beneath them.
Build it yourself
The starter workbook
The AUM roll-forward has been cleared: each product’s opening AUM, flow rate, market return, net flows, market performance, distributions, closing and average AUM, and the totals beneath. Rebuild it from the Assumptions sheet. The Checks sheet shows when the roll-forward ties and the fees, margin and grids follow again.
Blanks: AUM roll-forward: flows, markets and distributions. Download it beside the worked model.
The path around this model
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How to Build a DCF Model: From Operating Assumptions to a Defensible Valuation
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Financial Modelling Best Practices: The Conventions That Make a Model Auditable
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Vocabulary: AUM (Assets Under Management), Assets Under Management Fee (Management Fee), Active vs. Passive, Two and Twenty (2 and 20), High-Water Mark, Basis Points (bps), Free Cash Flow (FCF), Terminal Value, Enterprise Value (EV).
Questions about this model
What is organic growth?
Net flows over opening AUM: what clients put in less what they take out, before markets move anything. Here the manager grows AUM from $350.0bn to $363.2bn in FY1E, but organic growth is only 0.9%; the rest is market performance less distributions. Equities lose assets every year while ETFs and alternatives gain them.
What is the blended fee rate?
Management fees over average AUM, which is each product’s fee weighted by its assets. It is 39.63bp in FY1E and falls every year, partly because each fee is compressed and partly because the mix moves towards cheaper ETFs and away from active equities. Alternatives work the other way: at 95bp they lift the blend as they grow.
Where does the operating leverage come from?
Compensation moves with revenue, but technology, premises and data do not. When markets lift AUM, revenue rises and the fixed costs are already paid, so margin rises with it. The base case holds a margin of 32.6% in FY1E; the upside, with stronger markets and flows, reaches 36.6% by FY5E, and the downside falls to 13.5%.
Why is a DCF appropriate here when it is not for a bank?
An asset manager needs little capital and carries no debt that is part of its product, so its free cash flow is simply fee revenue less costs and tax. Discounting it gives $21.47 a share, close to the $22.13 that the mid peer P/E of 13 times gives on forward EPS of $1.70.
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