What Is Asset Under Management (AUM) of Mutual Fund?

Top 10 fund houses

What Is Asset Under Management (AUM) of Mutual Fund?

AUM definition with example

Introduction

In Mutual Funds, many investors sharing a common investment objective pool in their money. The sole intention of their investment is earning returns. This pooled money is known as the Asset under Management of the scheme. In this article we will discuss more about AUM.

AUM of the Indian Mutual Fund Industry has grown from ₹ 4.17 trillion (31st Mar, 2009) to ₹23.80 trillion (31st Mar, 2019). The growth is more than 5 ½ times in a span of 10 years.

What is Asset Under Management (AUM)?

  • Asset Under Management (AUM) is ‘the total market value of Assets or Capital that a Mutual Fund holds on behalf of its investors’.
  • It is an indicator of the size and success of the Fund House. Net assets of any scheme gives fair idea of confidence level of investors in the mutual fund scheme.
  • AUM generally rises when the fund has consistently delivered positive returns as they attract new investments. Likewise, if the fund starts hitting reds it can reduce the assets. Whenever an investor invests new funds or redeems his investments it has an effect on assets of the fund.
  • High Asset Under Management (AUM) is an indicator of investors confidence on the fund manager and the fund house. If the fund has had a glorious past it is more than enough to attract more investors to it.

AUM wise Top 10 Fund Houses

AUM Wise Top 10 Fund Houses
AUM Wise Top 10 Fund Houses

EXAMPLE

Lets observe the trend of ABSL Frontline Equity scheme’s AUM as compared to the average AUM of Large Cap Category. And also its AUM growth with the AUM growth of category whether positive or negative in the industry.

AUM of ABSL Frontline Equity Fund and Large Cap Funds Category Average
AUM of ABSL Frontline Equity Fund and Large Cap Funds Category Average
  1. Above graph shows the rise in AUM of Aditya Birla Sun Life Frontline Equity Fund as compared to the Large Cap funds category average on the Primary Axis (Left axis)
  2. The graph also shows the % growth at which the AUM has changed since Jan-08 when compared with % growth in AUM of Large Cap funds category on Secondary Axis (Right axis).
  3. ABSL Frontline Equity Fund is the largest Large Cap fund in the category. It has shown decent growth in AUM until in recent months the growth has been little lower than category average. For more detailed analysis of Aditya Birla Sun Life Frontline Equity Fund, Refer : https://mfyadnya.in/
  4. Overall, a High AUM with good growths shows investor’s trust in fund’s management and performance 

AUM BASED TER (Total Expense ratio) by SEBI

  • Every fund house charge their investors through Expense Ratio. It is a management fee levied by fund house which is proportional to the fund size.
  • Generally it is observed that most funds who have higher AUM charge a lower Expense Ratio. Thereby increasing profits in the hands of investor. There are a few exceptions for this like ICICI
  • Note- In its press release dated 12th Sept 2018, SEBI has defined updated Total Expense Ratio slabs based on total AUM of fund houses. These slabs are as below:
Updated Total Expense Ratio Slabs by SEBI based on Total AUM of Fund Houses

Updated Total Expense Ratio Slabs by SEBI based on Total AUM of Fund Houses

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