What is asset under management (AUM)?

Assets Under Management (AUM) is the total market value of investments or assets maintained by a mutual fund. AUM indicates the cumulative market value of the assets that a mutual fund holds.

Calculating AUM

Calculating the AUM is a dynamic process, given that it reflects the constant fluctuations in market valuations of various assets. Thus, the AUM rises when the investments are performing well.

On the contrary, when the market drops or when investors opt to redeem their shares, the AUM tends to decrease. Since this value varies from day to day, its net change is usually noted daily after the market closes.

Impact of high AUM on mutual funds

Having a high AUM can be both an advantage and a challenge for mutual funds. It is worth mentioning that a high AUM does not always equate to potentially better returns. A mutual funds performance depends on the fund manager's expertise and their ability to make smart investment decisions.

Let’s check out the role of AUM in different types of mutual funds:

Equity funds: The impact of AUM can be minimal. In case of equity funds, the returns are more about the skills of the asset manager than the size of the AUM. Large-cap funds, for instance, rely more on market yields than their AUM size.

Debt funds: A larger AUM value can mean reduced individual fixed fund expenses and relatively higher returns as the operating costs are spread over a more extensive asset base.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.