When researching mutual fund schemes, one of the most referenced terms you may come across is AUM. Understanding what it stands for and how it influences your investment decision is essential for building a sound portfolio. Whether you’re investing through an SIP, a lumpsum, or considering a fixed maturity plan, knowing the size and scope of a fund’s AUM can give you useful insights.

In this article, we’ll explain the AUM full form, its role in mutual fund analysis, and how to interpret it when comparing schemes—especially for Indian investors.

What is the AUM full form?

The AUM full form is Assets Under Management. It refers to the total market value of the assets that a mutual fund scheme or asset management company manages on behalf of its investors. For example, if a mutual fund scheme has an AUM of Rs. 2,000 crore, it means that the fund manager is managing investments worth that amount on behalf of the investors. AUM includes all the securities in the fund’s portfolio, such as stocks, bonds, cash, and other market instruments.

How is AUM calculated?

AUM is calculated by summing up the current market value of all the securities held in a mutual fund scheme. It also includes any cash or receivables held by the fund, minus any liabilities or expenses due.

AUM changes daily based on:

• Market movements (as prices of underlying securities fluctuate)
• Net inflows or outflows (more investors entering or exiting the fund)
• Dividends or interest income received by the fund

Because AUM changes over time, it is useful to look at historical trends along with current values when analysing a mutual fund.

Why is AUM important in mutual fund analysis?

While AUM is not the sole factor to consider when evaluating a fund, it offers several important insights:

1. Indicates fund popularity and investor trust: A higher AUM may reflect that more investors have confidence in the fund. This is particularly relevant in schemes like equity large-cap funds or debt funds, where scale can help manage costs efficiently.
2. Impacts expense ratio: As AUM rises, the fixed costs of running the scheme are spread over a larger base, potentially reducing the total expense ratio. However, this may vary across categories and schemes.
3. Affects liquidity and management strategy: Schemes with higher AUMs may have better liquidity, allowing easier entry and exit. That said, managing a very large fund can pose challenges in certain categories like small-cap funds.
4. Useful for assessing size suitability of certain schemes: In a fixed maturity plan, AUM helps indicate how much has been mobilised within the closed-end structure. It may also reflect how diversified the investment spread is across underlying instruments.

How AUM interacts with fixed maturity plans

A fixed maturity plan (FMP) is a closed-end debt mutual fund scheme that invests in fixed income securities with a defined maturity. These schemes are typically launched for a set period (e.g., 3 or 5 years), and investors can invest only during the new fund offer (NFO) period.

AUM plays a unique role in FMPs:

• It shows how much money the fund manager has mobilised to construct a well-diversified portfolio
• Since the investment universe is pre-decided, a moderate AUM may allow efficient allocation across bonds and instruments of the same maturity profile
• AUM, however, should not be viewed as a measure of performance for FMPs, since the underlying returns depend more on yield-to-maturity at the time of portfolio construction

Analysing AUM in fund selection

Let’s consider an example: a hypothetical investor called Neha wants to invest Rs. 1,50,000 in a debt fund and is comparing two schemes. Fund A has an AUM of Rs. 8,000 crore, while Fund B has an AUM of Rs. 600 crore.

Both have similar portfolio allocations and investment mandates. In this case:

• Fund A may benefit from better economies of scale and lower expense ratio
• Fund B, being smaller, may offer agility in navigating short-term bond opportunities

However, AUM alone should not drive the decision. Neha should also consider portfolio quality, past consistency, and suitability for her time horizon and risk profile. Please remember, though that any historical information or past data should not be taken as an indication or guarantee of any future performance.

What AUM does not tell you

While AUM provides useful context, it does not indicate:

• How well the fund has performed in the past
• Whether the fund manager has maintained consistent strategy
• If the fund is right for your risk appetite or investment goal
• The quality of underlying securities

For these, you must look at other metrics like standard deviation, fund objective, portfolio holdings, credit quality (for debt funds), and benchmark comparison.

Final thoughts

Understanding the AUM full form—assets under management—is a great starting point when reviewing mutual fund schemes. It tells you how large a fund is and helps you interpret scale, cost, and investor participation. However, AUM is only one part of the decision-making process.

When evaluating mutual funds—be it an equity scheme, debt plan, or a fixed maturity plan—always combine AUM analysis with your personal goals, time horizon, and risk profile. If you’re ever unsure, it is advisable to consult with a financial planner or investment advisor before investing.

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