AUM in private equity is the total capital that limited partners have committed to a firm’s funds, not the fluctuating market value of what those funds currently hold. That single distinction sets PE apart from mutual funds and ETFs, where AUM equals the daily market value of securities on the books. 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. But the way PE firms define, calculate, and report the number varies by purpose, and the same pool of capital can appear as three different figures depending on who’s asking.
Why PE AUM Isn’t Like Mutual Fund AUM
Mutual funds and ETFs invest in securities that trade on exchanges, so their AUM updates continuously with market prices. Private equity funds invest in private companies with no ticker and no live price. There is nothing to mark to market by the second, so PE AUM is anchored to a concept public markets don’t have: committed capital.
Committed capital is the total amount limited partners have contractually promised to invest in a specific fund. When an LP signs on to a $500 million fund, the full $500 million counts toward the firm’s AUM from day one, even though the GP hasn’t spent a dollar yet. PE funds typically operate on a ten-year lifecycle with an option for one-year extensions, and the GP calls down that capital gradually as investment opportunities appear.
The portion the GP has actually called and put to work is drawn capital, or invested capital. The gap between committed 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 isn’t invested in anything. That’s not sleight of hand. It’s how the metric works, and it’s why the headline number and the money actually at work can differ by hundreds of millions of dollars.
How PE Firms Calculate AUM
Which base a firm uses depends on where the fund is in its life. During the investment period, which typically lasts five to six years, most GPs report AUM as total committed capital. This produces the largest possible number and is the base the initial management fee is charged against.
After the investment period closes, the calculation often shifts to the cost basis of investments plus any remaining uninvested capital. Cost basis means the amount the GP originally paid for each portfolio company, regardless of whether those companies have gained or lost value since. That produces a more conservative and relatively stable figure that only changes when the GP makes a new investment or exits a holding.
Fee-Paying AUM and the Step-Down
The AUM figure a firm uses in marketing is often different from the one used to charge fees. The number that actually determines your fee bill is Fee-Paying AUM, or FPAUM, and its methodology is spelled out in the fund’s limited partnership agreement. FPAUM 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 pay full fees on money already returned to them or sitting idle.
Management fees for most buyout funds run 1.5% to 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 has intensified. The math gets concrete quickly. A $500 million fund charging 2.0% on committed capital generates $10 million a year for the GP during the investment period. After a step-down to a cost basis of $350 million in unrealized investments, the same 2.0% rate drops 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 total tens of millions in LP savings.
Any prospective LP should trace the exact FPAUM formula and step-down timeline before committing. Two funds with identical headline AUM can generate very different fee bills, and 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 flagging: carried interest, the 20% performance fee that gives PE its reputation for GP compensation, is not calculated from AUM at all. It comes out of actual investment gains above a preferred return, so it doesn’t factor into any of the AUM calculations covered here.
Regulatory AUM and the SEC
There’s a third version of AUM that matters for compliance rather than fees. Regulatory assets under management, or 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, meaning the full amount LPs have promised but haven’t yet contributed still counts toward the firm’s reported RAUM.1U.S. Securities and Exchange Commission. Form ADV – General Instructions
RAUM 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, and an SEC-registered adviser can remain registered until 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 under rules adopted after the Dodd-Frank Act. These exempt reporting advisers 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 result: 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 an incomplete picture.
How Portfolio Valuations Feed the Number
Because PE investments don’t trade, fund managers estimate the fair value of portfolio companies, usually quarterly. Valuations follow the fair value framework under U.S. accounting standards, which sets a three-level hierarchy. Level 1 uses quoted prices in active markets. Level 2 relies on observable market data for similar assets. Level 3, where nearly all PE holdings land, uses unobservable inputs like projected cash flows, comparable transaction multiples, and the GP’s own assumptions about future performance.
Level 3 involves meaningful judgment. Two GPs holding similar companies could reasonably arrive at different values, which is one reason AUM based on committed capital or cost basis remains more common than AUM based on current valuations during a fund’s active years. A GP could inflate AUM by marking up portfolio companies aggressively, and that’s the kind of behavior regulators watch for.
Fund financial statements are typically audited annually by an independent accounting firm that reviews the GP’s valuation methodology and assumptions. LPs should read audit reports alongside reported NAV to see whether valuations line up with the fund’s actual exit results over time. A pattern of audited values dropping right before exits is worth a closer look.
AUM Doesn’t Tell You If the Fund Is Any Good
AUM measures how much capital a firm controls. It says 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 sits in separate metrics.
Net Asset Value is the current fair market value of all investments and cash held by the fund minus liabilities. Comparing NAV to cost-basis AUM reveals whether the GP has created or destroyed value. If a fund deployed $400 million and NAV stands at $600 million, the GP has generated $200 million in unrealized gains.
Total Value to Paid-In Capital, or TVPI, measures total value returned to LPs (distributions plus remaining NAV) divided by capital actually contributed. A TVPI of 1.5x means an LP expects $1.50 back for every dollar in. TVPI is intuitive but blind to time. A 1.5x return over four years is far better than 1.5x over twelve.
Internal Rate of Return solves the timing problem by annualizing returns while accounting for when capital was called and when distributions were paid. A fund with a lower TVPI but faster distributions can post a higher IRR than one with a bigger multiple that takes twice as long. A fund can have massive AUM and poor IRR, which usually signals the GP raised more capital than it could deploy effectively.
When AUM Calculations Cross the Line
Misrepresenting AUM or manipulating the fee-paying base is not just an accounting dispute. 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 LPs. Penalties included disgorgement of overcharged fees plus interest totaling over $500,000, a $175,000 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 LPA 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 another quarter. LPs can protect themselves by insisting on detailed FPAUM calculation examples in the LPA, requiring annual fee reconciliations, and reviewing audited financials for consistency between reported AUM and the actual fee base.