Asset Under Management (AUM) refers to the total market value of all the investments a mutual fund manages. Think of it like a big money pool collected from all investors in a fund.
🔍 Example: If 100 people each invest ₹10,000 in a mutual fund, the AUM becomes ₹10,00,000.
It’s similar to how we look at market capitalization in stocks—both help us understand how big the fund or company is, and what returns you might expect based on the amount of money being managed.
📈 Why Does AUM Matter?
1. Shows the Size of a Mutual Fund
AUM tells you how big or popular a mutual fund is. A higher AUM usually means that more people have invested in it.
🔍 Example: If Fund A has ₹5,000 crore AUM and Fund B has ₹50 crore AUM, Fund A is managing a lot more money.
2. Can Influence Returns
Large AUMs might find it harder to grow quickly, because it becomes difficult to find enough good opportunities to invest that much money.
🔍 Example: A ₹10 crore fund can invest in small, high-growth startups easily. But a ₹5,000 crore fund might struggle to find equally rewarding opportunities without influencing the market too much.
3. Affects Costs and Minimum Investment
Some funds with large AUMs may have higher minimum investment amounts. This could make them less accessible to small investors. On the other hand, big AUMs can help reduce per-person costs due to economies of scale.
Does AUM Change?
Yes, it can change daily based on:
- Market performance (if the fund’s investments rise or fall in value)
- New money coming in (more people investing)
- Withdrawals (people pulling out their money)
🔎 Types of Mutual Funds and How AUM Affects Them
Equity Funds
These aim to beat the market using expert strategies. AUM isn’t the most critical factor here—what matters more is the skill of the fund manager.
Debt Funds
Here, a higher AUM is helpful. Costs like administration are spread across more investors, which lowers individual fees and can improve returns.
Small-Cap Funds
These can be affected by too much AUM. If they get too big, they might struggle to find small, high-potential stocks without owning too much of them.
Large-Cap Funds
These invest in large companies. AUM doesn’t make much difference here. Even smaller funds can perform well if the strategy is solid.
💰 Does Higher AUM Mean Better Returns?
Not always. A big fund doesn’t guarantee better performance. What matters more is how skilled the fund manager is and whether the strategy fits your goals.
🔍 Example: A smaller mutual fund with a sharp, agile fund manager might generate higher returns than a large fund bogged down by size.
🧮 How Is AUM Calculated?
It includes:
- The current market value of all the stocks, bonds, and assets held
- Any cash or bank deposits
- Incoming investments
- Minus any withdrawals by investors
AUM goes up when:
- More investors put money into the fund
- The market value of the fund’s holdings goes up.
It goes down when:
- Investors pull out their money
- The investments lose value in the market.
📊 AUM vs NAV – What’s the Difference?
| Feature | AUM | NAV |
| What is it? | Total market value of all assets in the fund | Price per unit/share of the mutual fund |
| Changes | Daily with market performance and investments | Daily based on asset performance |
| Purpose | Tells size of the fund | Tells value of your investment per unit |
Example: If a fund has ₹100 crore AUM and 10 crore units, the NAV = ₹10.
💸 How AUM Affects Expense Ratio
The expense ratio is the fee mutual funds charge for managing your money. AUM and expense ratio are closely connected.
- Bigger funds might charge lower fees per person, because their expenses are spread over many investors.
- But managing a large fund can also be complex, so the total cost may still be high.
💡 SEBI rules make sure fund houses don’t charge more than a fixed percentage of their AUM.
Real-World Example
A 2012 study on 361 equity mutual funds showed many had low AUMs (under ₹100 crore) but grew rapidly. For instance, the total investments rose from ₹530 crore in 2008 to ₹3,841 crore in 2012, showing the growth potential of funds over time.