Assets Under Management (AUM) in mutual funds refers to the total value of the assets a fund scheme manages on behalf of its investors, after deducting its liabilities, including investments and cash holdings. AUM of a mutual fund scheme changes with investor inflows and redemptions, and with fluctuations in the market value of the underlying assets.
Quick Overview:
- AUM stands for Assets Under Management and indicates the scale of a mutual fund scheme’s assets.
- AUM measures the overall size of a mutual fund scheme, while NAV represents the per-unit value of the scheme after accounting for its liabilities.
- AUM helps investors understand a fund’s size and track changes in its asset base. Investors should assess it alongside returns, risk, expense ratio, and investment strategy.
Every month, millions of Indian retail investors invest thousands of crores in mutual funds through Systematic Investment Plans (SIPs). Every rupee invested or withdrawn during market corrections directly affects a scheme’s Assets Under Management (AUM).
But what exactly does AUM tell you about a mutual fund? Let’s explore what it means, how it is calculated, why it matters, and what factors influence it.
What Is the AUM Full Form in Mutual Funds?
AUM stands for Assets Under Management. In mutual funds, it refers to the total market value of a scheme’s assets after deducting its liabilities. AUM can be measured at the scheme level, across all schemes managed by an Asset Management Company (AMC), or across the mutual fund industry as a whole.
Generally, an individual mutual fund’s AUM includes assets such as stocks, bonds, and other financial instruments. A mutual fund can also hold cash and cash equivalents to meet expenses, manage liquidity, and handle redemption requests.
Since inflows and outflows are constant, a mutual fund’s AUM changes daily. So, when investors invest in a scheme, its AUM increases, while withdrawals and redemptions reduce it. In addition, changes in the market value of the underlying investments can also affect AUM. For instance, if the stocks held by an equity mutual fund rise in value, its AUM may increase even if no new money has entered the scheme.
Beyond the total value of a scheme’s assets, AUM also offers useful context for understanding its scale and role in a mutual fund portfolio.
Why Is AUM Important?
A mutual fund’s AUM helps investors gauge the scale of its operations and how much money the fund is managing. It also provides context for evaluating the fund’s costs, liquidity, and investment approach. While a fund with larger AUM can help build investor trust, it doesn’t automatically mean the fund is performing better or managing risk well. AUM, along with other metrics, can be an important factor when considering investing in a mutual fund.
Here are the key reasons why AUM matters when evaluating a mutual fund.
- Shows the size of the fund: AUM indicates the total value of assets a mutual fund scheme manages. Investors use this figure to compare the size of different schemes and understand their scale.
- Helps explain the expense ratio: The expense ratio is the annual cost of running a scheme, expressed as a percentage of its average daily net assets. Since April 2026, SEBI has separated it into the Base Expense Ratio (BER), which covers AMC charges, brokerage, and statutory levies.
- Provides context for liquidity: AUM indicates a scheme’s size, while the liquidity of its underlying securities determines how easily it can meet redemption requests.
- Role in diversification: A larger AUM gives a scheme more room to invest across securities, but diversification still depends on its investment mandate and regulatory limits. In schemes focused on smaller companies, a very large AUM can also make buying and selling securities more difficult.
- Reflects investor activity and market performance: AUM changes as investors buy or redeem units and as the market value of the fund’s holdings rises or falls. Tracking these changes helps investors distinguish between growth driven by fresh inflows and growth resulting from market appreciation.
AUM is therefore a useful starting point when evaluating a mutual fund, but it should not be the deciding factor. While investing in a mutual fund scheme, investors should also consider historical returns, risk levels, expense ratio, portfolio composition, and investment strategy.
How Is AUM Calculated?
For open-ended schemes, AUM changes daily with investor purchases and redemptions, as well as market movements. Closed-ended schemes generally don’t accept fresh purchases after the initial offer period and redeem units only at maturity. Investors can usually sell their units on a stock exchange, but that doesn’t change the scheme’s AUM. A closed-ended scheme’s AUM therefore changes mainly with its portfolio’s market value, plus income and less expenses.
Regardless of scheme type, the formula for calculating AUM is:
AUM (net assets) = Market value of investments + Cash and cash equivalents + Accrued income and receivables − Liabilities and accrued expenses
(Note: Investors can check industry and individual mutual fund scheme-level data on AMFI’s official website)
Since both AUM and NAV fluctuate with market movements, investors often confuse the two. However, they measure different things, and understanding this distinction is essential to interpreting a mutual fund’s performance.
Difference Between AUM and NAV
| Differentiator | AUM (Assets Under Management) | NAV (Net Asset Value) |
| What it measures | Measures the overall size of a mutual fund scheme | Measures the value of each unit in a mutual fund scheme |
| Calculation | Net assets of the scheme: investments, cash, accrued income and receivables, minus liabilities. Also equals NAV × units outstanding | Net assets divided by the number of units outstanding |
| What affects it | Changes with investor inflows and redemptions, and with the market value of investments | Changes with the market value of investments, income, and expenses. Inflows and redemptions don’t change it directly, because units are issued and redeemed at NAV |
| Why it matters | Helps investors understand a scheme’s size and track changes in its asset base | Helps investors determine the per-unit price at which they buy or redeem mutual fund units |
What Factors Affect Mutual Fund AUM?
The following factors influence a mutual fund scheme’s AUM.
- Market value of underlying assets: When the market value of a fund’s stocks, bonds or other investments rises or falls, its AUM changes accordingly.
- Fund performance: Strong returns can increase AUM by raising the value of existing holdings and attracting fresh investments. Poor performance can have the opposite effect.
- Investor sentiment: Positive market sentiment and confidence in a scheme can encourage more investors to invest, while concerns about market conditions or fund performance can lead to withdrawals.
- Fund expenses and liabilities: Expenses and outstanding liabilities reduce a scheme’s net assets, which affects its reported AUM.
Tracking these factors helps investors understand why a fund’s AUM changes over time and whether its growth comes from market performance, fresh investments or both.
Conclusion
AUM is most useful when you consider it alongside the type of fund and its investment strategy. For investors, the key is whether the fund’s size supports its investment approach or creates portfolio management challenges. This makes AUM a useful measure of scale, rather than a standalone indicator of investment quality.
