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

Asset Under Management (AUM) is the total market value of Assets or capital that a Mutual Fund holds on behalf of its investors.

Introduction

Many investors pool their money in Mutual Funds to pursue a shared investing goal. Their investment is only for the purpose of generating profits. The scheme’s Asset under Management refers to the money that has been pooled. More AUM will be discussed in this article.

The Indian mutual fund industry’s AUM has increased from 4.17 trillion (as of March 31, 2009) to 23.80 trillion (as of March 31, 2010). (31st Mar 2019). In a ten-year period, the increase is more than 5 12 times.

In this article, we will discuss what is aum in a mutual fund, asset under management meaning, aum mutual fund meaning, what is an asset under management in a mutual fund, aum meaning finance, etc. Also, a detailed what is an asset under management is covered in this article.

What is Asset Under Management (AUM)?

• The total market value of assets or capital that a Mutual Fund holds on behalf of its investors is referred to as Asset Under Management (AUM).
• It is a measure of the Fund House’s size and success. Any plan’s net assets provide a good indication of how confident investors are in the mutual fund scheme.
• When a fund continually delivers positive returns and attracts new assets, its AUM climbs. Similarly, if the fund starts to lose money, it can lower its assets. The assets of the fund are affected whenever an investor invests new funds or redeems his existing interests.
• High Asset Under Management (AUM) is an indicator of investors’ confidence in 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

EXAMPLE

Let’s look at the AUM trajectory of the ABSL Frontline Equity scheme in comparison to the Large Cap Category’s average AUM. Also, its AUM growth is correlated with the category’s AUM growth, whether positive or negative in the industry.

1. On the Primary Axis, the graph above depicts the increase in AUM of Aditya Birla Sun Life Frontline Equity Fund in comparison to the Large Cap funds category average (Left axis)
2. The graph also depicts the percent change in AUM since January 2008 when compared to the percent change in AUM in the Large Cap funds category on the Secondary Axis (Right axis).
3. The ABSL Frontline Equity Fund is the category’s largest Large Cap fund. It has had good AUM growth until recently when it has performed a little slower than the category average. Refer to https://mfyadnya.in/ for a more complete review of Aditya Birla Sun Life Frontline Equity Fund.
4. Investors’ trust in the fund’s management and performance is demonstrated by a high AUM with solid growth.

AUM BASED TER (Total Expense ratio) by SEBI

1. The Expense Ratio is how every fund firm charges its investors. It is a proportional management fee charged by the fund house in relation to the size of the fund.
2. Most funds with higher AUM charge a lower-Expense Ratio than those with lesser AUM. As a result, the investor’s earnings increase. There are some exceptions to this rule, including ICICI
3. Note: SEBI specified new Total Expense Ratio slabs based on the total AUM of fund companies in a press release dated September 12th, 2018. These are the slabs in question:

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

Asset under Supervision:

Here is the asset under supervision definition;

Assets under supervision include customer assets under management and other assets on which the bank earns fees for advice and other services. Investment banking brings in more money than most other banks.

How important is AUM for investing?

A mutual fund with a large AUM has a broad client base, implying that the fund has a strong trust factor. AUM can be used to calculate liquidity. A larger AUM can act as a safety net in the event of a large redemption. This is particularly true for overnight and liquid funds, which are vulnerable to big institutional redemptions. The ability to absorb shock unloading is improved by having a bigger AUM for such funds.

It’s important to remember that size is relative. Whether it’s small or enormous depends on what you’re comparing it to. Rather than focusing on the absolute value of assets managed by a mutual fund, compare the figure to that of its peers to determine how well the fund is performing.

Furthermore, having a large AUM does not always imply superior performance. Although it is important to consider, the AUM of a fund should not be the only element in your investment selection. Just because others in the market have put their trust in a fund house does not mean you should as well. Consider AUM in conjunction with other factors such as a fund’s historical performance in comparison to peers over time, expense ratio, risk ratios, fund house pedigree, fund manager repute, risk-management tactics, and compliance, among others.

How do Calculate Assets Under Management?

The value of the assets managed by a fund is never fixed. It varies depending on the number of investors that contribute money and the fund’s profits.

Positive returns improve the value of the total investment and can also attract new investments, increasing the AUM. Returns that are negative will have the opposite effect. The AUM will be affected by unit redemption.

AUM and market fluctuations

The AUM in mutual funds is directly affected by market volatility. This is because price changes will affect the value of the assets held by the fund. For example, suppose 100 individuals invest $1,000,000 in a fund that invests in market companies and gets a 10% return. The AUM would then be $110,000. Alternatively, the AUM would have been $90,000 if the fund had lost 10% of its value.

A well-diversified fund, on the other hand, will be able to endure market volatility regardless of its asset size.