What is AUM in Mutual Funds?

Assets under management (AUM) represents the total market value of investments overseen by an individual or entity on behalf of clients. It serves as a crucial metric in evaluating the performance and experience of management within a company or institution.

The calculation of AUM can encompass various financial instruments, including bank deposits, mutual funds, and cash reserves, depending on the policies of the financial institution. While some include a broader range of assets, others may restrict it to funds under discretionary management from individual investors.

AUM aggregates the market value of all investments managed by a fund, family of funds, venture capital firm, brokerage company, or an individual registered as an investment advisor or portfolio manager. For instance, if an investor has Rs 50,000 invested in a mutual fund, that amount contributes to the total AUM of the fund. Fund managers have the authority to execute transactions within the investment objectives using the pooled funds without requiring explicit permissions.

Also read: What is NAV in Mutual Funds?

Furthermore, AUM comprises the capital available for transactions on behalf of clients. Investors may be required to maintain a minimum level of personal AUM to access certain investment opportunities, such as hedge funds, ensuring they possess the financial capacity to withstand market fluctuations. An investor’s AUM often correlates with their net worth and dictates the level of services provided by financial advisors or brokerage firms.

The calculation of AUM varies across entities and is contingent upon the inflow and outflow of investor funds. Factors such as asset performance, capital appreciation, reinvested dividends, and the acquisition of new customers contribute to an increase in AUM. Conversely, declines in market value, poor asset performance, fund closures, and reduced investor inflow lead to a decrease in AUM over time.

According to data from the Association of Mutual Funds in India, the Average Assets Under Management (AAUM) of the Indian Mutual Fund Industry reached Rs 55,00,728 crore as of March 2024. The AUM of the Indian Mutual Fund Industry stood at Rs 53,40,195 crore as of March 31, 2024.

The growth trajectory of the Indian Mutual Fund Industry’s AUM is noteworthy, witnessing a significant increase from Rs 8.25 trillion in March 2014 to Rs 53.40 trillion in March 2024, marking a more than six-fold surge over the span of a decade. Similarly, from March 2019 to March 2024, the industry’s AUM surged from Rs 23.80 trillion to Rs 53.40 trillion, demonstrating a more than two-fold increase in just five years.

Assets under management play a pivotal role in assessing the financial health and performance of investment management entities. The steady growth witnessed in the Indian Mutual Fund Industry’s AUM reflects robust investor confidence and underscores the industry’s potential for further expansion and development in the future.

Source: AMFI

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Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as investment or trading advice. The author is not a financial advisor and does not have any professional qualifications in this area. The author does not guarantee the accuracy or completeness of the information provided. Any action you take based on the information in this blog post is done at your own risk. Please consult with a financial advisor before making any investment.