What is Assets Under Management?
The total market value of the investments that an organization manages on behalf of its clients is known as Assets Under Management or AUM. A financial institution’s assets under management include the capital raised from investors and the capital belonging to the principals of the fund management firm.
The Assets under management are directly proportional to the performance of the financial institution. Better performance of the institution would imply more assets under management. Certain financial institutions include bank deposits, mutual funds, and cash while calculating their assets under management, while the others include only the funds under discretionary management, wherein the investor assigns authority to the company to trade on his behalf.
The respective fund managers manage these assets and make decisions related to the investments on behalf of all the investors. AUM is basically known to indicate the size and success of the fund house.
Why is AUM Important?
Since the assets under management define the size and success of a company, it is important that investors consider them before making any investment choices. The value of AUM of a company also includes the returns that a mutual fund earns, hence can be easily compared with its peers. If a fund’s AUM is higher, it can be an indicator that the fund is doing well and the investor may consider investing in it.
However, the value of AUM cannot be the only factor to be considered while making the decision of investing in the fund. Expense ratio, Fund managers, previous years’ returns, etc. are some factors that should be of concern.
Fund houses use different methods to calculate the assets under management of a company. When the fund gives positive returns, the overall investments made in the fund will rise, leading to an increase in the number of investors in the fund and hence, increase in assets under management.
Similarly, if the fund consistently gives negative returns, it will lead to a decrease in assets under management of the company. Likewise, if the fund closes unexpectedly, or if an investor redeems his/her share, the fund’s value will decrease. Assets under management also include the shares held by the company’s executives.
However, it must be noted that the value of assets under management is never constant. It changes, depending upon the flow of investor money in and out of the fund. Increased investor inflows, capital appreciation, and reinvested dividends affect the AUM of a fund positively. Along with this, the asset performance also affects the value of assets under management.
AUM in Mutual Fund
Higher AUM does not always indicate positive performance of an equity fund. Different types of mutual funds function differently on the changes in the value of AUM.
It is the fund manager who is responsible for exploiting the market opportunities at the right time, in the right manner. It is, therefore, suggested that investors consider the performance of the fund against its benchmark and competitors before investing.
AUM of the Top-Performing Funds 2019
Following are a few of the top performing funds in 2019 along with their Assets under management.
|Axis Bluechip Fund||Large-Cap||₹6,501 Crore|
|Kotak Standard Multicap Fund||Multi-Cap||₹24,959 Crore|
|HDFC Small Cap Fund||Small-Cap||₹7,894 Crore|
|Franklin India Prima Fund||Mid-Cap||₹6,686 Crore|
|Axis Long Term Equity Fund||ELSS||₹18,953 Crore|