Minimum AUM

[Smith1776]

Hey folks.

Bit of a niche question for you guys. What is the minimum AUM a fund has to have before you'd feel confident investing in it? As I'm sure we're all aware, low AUM is the primary reason a fund would shut down. If we assume you are in a taxable account you'd have to eat a bunch of gains.

What are your thoughts?

[D1984]

Hey folks.

Bit of a niche question for you guys. What is the minimum AUM a fund has to have before you'd feel confident investing in it? As I'm sure we're all aware, low AUM is the primary reason a fund would shut down. If we assume you are in a taxable account you'd have to eat a bunch of gains.

What are your thoughts?

That would depend...are we talking private fund (i.e. accredited and/or sophisticated investors only), an SMA, or would this be referring to an ETF/mutual fund/CEF/UIT?

In any event, IIRC Wes Gray and Meb Faber discussed this on one of their podcasts and the figure they said was $19 or $20 million minimum just to meet trading/management costs (assuming there is no sponsor willing to subsidize the fund for the first year or two of its existence until it gets big enough to pay its own costs without excessively eating into assets) for an ETF or mutual fund....although they also did state that an SMA would theoretically require a much lower amount than that...ETFs and mutual funds do have certain compliance costs that SMAs don't.

I would be willing to invest some in a fund with maybe as little as $10 to $11 million AUM (for an ETF or mutual fund taht was starting out) provided :

1. I trusted the management,

2. I knew what the strategy and philosophy behind it was and was reasonably confident that the strategy would work going forward

3.. It could show it was growing its assets (i.e. that it wouldn't be a tiny AUM fund forever),

4. Management fees were reasonable (i.e. no charging 2 or 3%--or even worse, 2 and 20--just because the asset base is low to begin with).

The same factors would apply to investing in an SMA but I probably would be willing to tolerate an even AUM at first since SMAs shouldn't have to meet all the costs funds do.

[boglerdude]

cash in a local bank and Vanguard. Too big to fail too watched to scam you.

[dualstow]

cash in a local bank and Vanguard. Too big to fail too watched to scam you.

^ Same here, pretty much ^

[Xan]

cash in a local bank and Vanguard. Too big to fail too watched to scam you.

^ Same here, pretty much ^

I would have thought Wells Fargo would fall in the "too watched to scam you" category but it seems to keep happening.

[dualstow]

I don’t know how they sleep at night.

[yankees60]

I don’t know how they sleep at night.

The same way all other businesses do that behave in an unethical manner or is a detriment to society.

Cigarette companies.

Coca Cola

Other junk food producers

The list is endless

[Mountaineer]

I don’t know how they sleep at night.

The same way all other businesses do that behave in an unethical manner or is a detriment to society.

Cigarette companies.

Coca Cola

Other junk food producers

The list is endless

Add:
All non-Apple electronics.

[yankees60]

I don’t know how they sleep at night.

The same way all other businesses do that behave in an unethical manner or is a detriment to society.

Cigarette companies.

Coca Cola

Other junk food producers

The list is endless

Add:
All non-Apple electronics.

Our ever-humorous Mountaineer!

[yankees60]

I don’t know how they sleep at night.

The same way all other businesses do that behave in an unethical manner or is a detriment to society.

Cigarette companies.

Coca Cola

Other junk food producers

The list is endless

Add:
All non-Apple electronics.

Also just read this so can add many others to the list!

"YouTube incentives are really terrible in that the algorithm rewards really bad behavior and low value creative elements that emphasize clicks and outrage rather than quality. The amount of a scammy videos, bad advice, and outright fraud and misrepresentation on YouTube is staggering. It is one of the primary drivers of predatory financial schemes, from dodgy cryptocurrencies to overpriced easy money masterclass subscriptions."

[Smith1776]

Hey folks.

Bit of a niche question for you guys. What is the minimum AUM a fund has to have before you'd feel confident investing in it? As I'm sure we're all aware, low AUM is the primary reason a fund would shut down. If we assume you are in a taxable account you'd have to eat a bunch of gains.

What are your thoughts?

That would depend...are we talking private fund (i.e. accredited and/or sophisticated investors only), an SMA, or would this be referring to an ETF/mutual fund/CEF/UIT?

In any event, IIRC Wes Gray and Meb Faber discussed this on one of their podcasts and the figure they said was $19 or $20 million minimum just to meet trading/management costs (assuming there is no sponsor willing to subsidize the fund for the first year or two of its existence until it gets big enough to pay its own costs without excessively eating into assets) for an ETF or mutual fund....although they also did state that an SMA would theoretically require a much lower amount than that...ETFs and mutual funds do have certain compliance costs that SMAs don't.

I would be willing to invest some in a fund with maybe as little as $10 to $11 million AUM (for an ETF or mutual fund taht was starting out) provided :

1. I trusted the management,

2. I knew what the strategy and philosophy behind it was and was reasonably confident that the strategy would work going forward

3.. It could show it was growing its assets (i.e. that it wouldn't be a tiny AUM fund forever),

4. Management fees were reasonable (i.e. no charging 2 or 3%--or even worse, 2 and 20--just because the asset base is low to begin with).

The same factors would apply to investing in an SMA but I probably would be willing to tolerate an even AUM at first since SMAs shouldn't have to meet all the costs funds do.

Thanks for the insight. I'll be looking for that podcast episode!