Return On Assets Managed - ROAM

See: Assets Under Management.

You were given $100 million to start and, in just a year, you turned it into $172 million. 72% annualized return. Nice work. But then, the next year, you were given a billion dollars more, so that now you had 1.172 billion AUM. You made another $72 million in your Year Two. But that number...kinda sucked.

Why? Because you had sooooo much more in assets under management. Meaning: you had only $100 million to start, and from that relatively small number, you made $72 million. But then, from a number about 6 times as large, you made the same return. Something like 6% return in Year Two.

The key: the total dollar value return doesn't mean all that much in a vacuum. It gets contextualized based on the amount of money you started with to then spit out a total annualized return. That's what this metric focuses on. And it gets really dicey in venture capital and private equity calculations where they don't call all the money upfront in the beginning. Rather, they make maybe a dozen calls for capital over the life of the fund, and the clock then starts ticking a dozen times.

Way complex to figure out the total return rates, annualized. But they do.