Most asset management companies typically receive compensation primarily based on assets under management (AUM). This model aligns the interests of the asset managers with those of their clients, as the fees are often structured as a percentage of the total assets they manage. As AUM increases, the revenue for the asset management firm rises accordingly, providing an incentive for managers to attract and retain clients' investments.
This structure also encourages asset managers to perform well, as increased client satisfaction can lead to more investment and, hence, a larger AUM. Clients benefit from this arrangement because they are usually charged fees that reflect the value of their investments rather than fixed fees that don’t account for the performance or scaling of the fund.
While the other options, such as basis points, property evaluation, and yield, relate to different aspects of asset management, they do not form the primary basis for compensation in most asset management companies. Basis points are often used to express fee structures based on AUM, but they are not the method of compensation themselves. Property evaluation may be relevant for real estate management firms, and yield pertains to the income generated by the investments, but neither directly represents the core compensation model for asset management as a whole.