In private equity, assets under management (AUM) is the total capital that limited partners have committed to a firm’s funds, not the day-to-day market value of what those funds own. That single distinction separates PE AUM from the number you see quoted for a mutual fund or ETF, and it’s the reason a firm can advertise billions in AUM while holding a substantial portion of that money in reserve. Global PE fund assets reached roughly $10.6 trillion in early 2026, and AUM remains the primary yardstick for a firm’s scale and fee-generating power.
Why Private Equity AUM Is Built on Commitments, Not Market Value
A mutual fund’s AUM equals the current market value of every security it holds. Prices update daily, and the AUM number moves with them. Private equity doesn’t work this way. PE funds invest in private companies that don’t trade on exchanges, so there is no ticker printing a fresh value every second. Instead, PE AUM is anchored to committed capital, a concept that has no real equivalent in public markets.
Committed capital is the amount LPs have contractually promised to invest in a specific fund. When an LP signs on to a $500 million fund, that full $500 million counts toward the firm’s AUM from day one, even though the general partner has not spent a dollar of it yet. PE funds typically operate on a ten-year lifecycle with an option for one-year extensions, and the GP draws down committed capital gradually as investment opportunities appear.
The portion actually called from investors and put to work is known as drawn capital or invested capital. The gap between committed capital and drawn capital is what the industry calls dry powder: money sitting on the sidelines waiting to be deployed. A firm advertising $2 billion in AUM might have $800 million of dry powder that hasn’t been invested in anything. That gap between the headline number and money actually at work is one of the most misunderstood aspects of PE AUM.
How PE Firms Calculate the Number
The AUM figure a PE firm reports depends heavily on where the fund is in its life and what purpose the number serves.
During the investment period, which typically lasts five to six years, most GPs use total committed capital as the AUM base. This produces the largest possible number, which is useful for marketing and sets the initial management fee base.
After the investment period closes, the calculation often shifts to the cost basis of investments plus any remaining uninvested capital. Cost basis is simply the amount the GP originally paid for each portfolio company, regardless of whether those companies have gained or lost value since. The method produces a more conservative and relatively stable figure that only changes when the GP makes a new investment or sells a holding.
Valuations of portfolio companies themselves involve meaningful judgment, because most PE holdings are valued using unobservable inputs like projected cash flows, comparable transaction multiples, and the GP’s own assumptions about future performance. Two GPs holding similar companies could reasonably arrive at different fair values. That’s part of the reason committed capital and cost basis, rather than current fair value, tend to drive AUM during a fund’s active years. A GP could otherwise inflate AUM by marking up portfolio values aggressively, which is exactly the kind of behavior that attracts regulatory scrutiny.
The Three Versions of AUM That Coexist
The same pool of capital can produce three different AUM numbers depending on who’s asking.
Marketing AUM
This is the number on the pitch deck and the website. It usually reflects committed capital across all active funds and is meant to convey scale.
Fee-Paying AUM
Fee-Paying AUM (FPAUM) is the specific capital base the management fee is charged against. The methodology is spelled out in the fund’s limited partnership agreement, and it frequently includes a step-down mechanism that reduces the fee base over time.
A common structure charges fees on 100% of committed capital during the investment period, then switches to fees on the remaining cost basis of unrealized investments afterward. The step-down exists because the GP’s active workload decreases as the fund matures and starts returning capital. Without it, LPs would be paying full fees on money already returned to them or sitting idle.
Regulatory AUM
Regulatory assets under management (RAUM) is the figure a firm reports to the SEC on Form ADV. The SEC’s calculation rules differ from how GPs typically present AUM to investors. For private fund accounts, regulatory AUM must include uncalled commitments, so the full amount LPs have promised but haven’t yet contributed counts toward the firm’s reported RAUM.1U.S. Securities and Exchange Commission. Form ADV – General Instructions
RAUM also determines which regulator oversees the firm. Investment advisers with at least $100 million in regulatory AUM may register with the SEC, and those with $110 million or more are generally required to do so. Firms below that threshold typically register with state regulators, with a buffer allowing SEC-registered advisers to remain registered until their RAUM drops below $90 million.2eCFR. 17 CFR 275.203A-1 – Eligibility for SEC Registration Private fund advisers managing less than $150 million in the United States can qualify for an exemption from full SEC registration adopted after the Dodd-Frank Act. Exempt reporting advisers still file a limited version of Form ADV but avoid the full compliance burden of registration.3U.S. Securities and Exchange Commission. Exemptions for Advisers to Venture Capital Funds, Private Fund Advisers With Less Than $150 Million in Assets Under Management
The practical point for LPs: a PE firm’s marketing AUM, fee-paying AUM, and regulatory AUM can all be different numbers describing the same pool of capital. Looking at only one gives you an incomplete picture.
How AUM Turns Into Management Fees
The management fee is the primary revenue stream for a PE firm, and FPAUM is the multiplier that determines its size. Most buyout funds charge an annual management fee between 1.5% and 2.0% of the fee-paying base, though recent industry data shows the mean rate for buyout funds dipping to about 1.61% as competition among GPs intensifies. The fee covers salaries, deal sourcing, due diligence, office overhead, and travel. It gets paid regardless of whether the fund’s investments perform well.
The math in concrete terms: a $500 million fund charging 2.0% on committed capital generates $10 million annually for the GP during the investment period, typically drawn quarterly from LP capital accounts. After the step-down kicks in, that same fund might charge 2.0% on a cost basis of $350 million in unrealized investments, dropping the annual fee to $7 million. Over a ten-year fund life, the difference between a committed-capital base and a cost-basis base can amount to tens of millions of dollars in LP savings.
Evaluate the fee percentage and the step-down schedule together, not separately. A slightly higher percentage with an early step-down can cost less over the fund’s life than a lower percentage that stays on committed capital for years.
One boundary worth naming: carried interest, the 20% performance fee that gives PE its reputation for outsized GP compensation, is not calculated from AUM at all. It’s based on actual investment gains above a preferred return (nearly 80% of PE funds set that hurdle at 8%). The management fee is a cost of doing business; carried interest is separate.
What AUM Doesn’t Tell You
AUM tells you how much capital a firm controls. It tells you nothing about whether the firm is any good at investing it. A $10 billion fund that destroys value is still a $10 billion fund by AUM. Performance lives in different metrics.
Net Asset Value (NAV) is the current fair market value of all investments and cash held by the fund minus liabilities. Comparing NAV to cost-basis AUM shows whether the GP has created or destroyed value. If a fund deployed $400 million and the NAV of those investments stands at $600 million, the GP has generated $200 million in unrealized gains.
Total Value to Paid-In Capital (TVPI) measures the total value returned to LPs (both distributions and remaining NAV) divided by the capital they’ve actually contributed. A TVPI of 1.5x means an LP expects to get back $1.50 for every dollar invested. TVPI is intuitive but blind to time. A 1.5x return over four years is far better than 1.5x over twelve.
The Internal Rate of Return (IRR) solves the timing problem by annualizing returns while accounting for exactly when capital was called and when distributions were paid. IRR is the industry’s standard performance benchmark, though it can be gamed by calling capital late and returning it early. A fund can have massive AUM and a poor IRR, which signals the GP raised more capital than it could deploy effectively.
Where LPs Get Overcharged
Misrepresenting AUM or manipulating the fee-paying base is not just an accounting disagreement. It’s a potential violation of federal securities law. The Investment Advisers Act prohibits investment advisers from engaging in any practice that operates as a fraud or deceit upon clients.4Office of the Law Revision Counsel. United States Code Title 15 – 80b-6 Prohibited Transactions by Investment Advisers
The SEC has brought enforcement actions against PE advisers who calculated management fees in ways that deviated from their own limited partnership agreements. In a 2025 case, the SEC found that an adviser’s fee calculations were inconsistent with the fund’s LPA and created conflicts of interest that were never adequately disclosed to limited partners. Penalties included disgorgement of overcharged fees plus interest, a civil penalty, a cease-and-desist order, and a requirement to distribute funds to harmed investors.5U.S. Securities and Exchange Commission. SEC Charges New York-Based Investment Adviser With Breaching Fiduciary Duty by Overcharging Management Fees to Private Funds
The common thread in these cases isn’t outright fabrication. It’s ambiguity in the LPA’s fee language that the GP interprets in its own favor without telling LPs. A fund might include certain transaction fees in the cost basis, or delay writing down a failed investment to keep the fee base higher for another quarter. Those gray-area decisions are what regulators examine when complaints arise.
Before committing capital, insist on detailed FPAUM calculation examples written into the LPA. Require annual fee reconciliations. Review audited financials for consistency between the reported AUM and the actual fee base, and watch for patterns where audited values consistently drop right before exits. Two funds with identical headline AUM can generate very different fee bills, and the difference sits in language most LPs never read closely enough.