Overview
Assets Under Management (AUM) has become the cornerstone metric that defines success in India's rapidly expanding investment landscape. With the Indian mutual fund industry crossing ₹74 lakh crore in AUM as of June 2025, understanding AUM across different investment vehicles—mutual funds, Alternative Investment Funds (AIFs), and Portfolio Management Services (PMS)—is crucial for investment advisors, wealth managers, and family offices.
Whether you're evaluating fund performance, assessing AMC credibility, or making strategic investment decisions for your clients, AUM provides critical insights that go far beyond simple performance metrics. At Steptrade Capital, we've seen firsthand how AUM analysis transforms investment advisory practices and client outcomes.
This comprehensive guide breaks down everything investment professionals need to know about AUM across mutual funds, AIFs, and PMS, including the latest 2025 industry trends and practical applications.
What is AUM?
Assets Under Management (AUM) represents the total market value of investments managed by a financial institution, fund manager, or investment advisor on behalf of clients.
In the Indian context, AUM calculation varies significantly across investment vehicles:
Mutual Funds AUM: The aggregate market value of all securities held across all schemes of an Asset Management Company (AMC). This includes equity funds, debt funds, hybrid funds, and ETFs.
AIF AUM: Total value of assets managed across all Alternative Investment Fund categories—including private equity funds, venture capital funds, hedge funds, and real estate funds.
PMS AUM: Combined market value of all individually managed client portfolios under Portfolio Management Services, where each client's portfolio is separately managed according to their specific investment objectives.
How Does AUM Different from NAV?
While AUM measures the total size of assets managed, Net Asset Value (NAV) represents the per-unit value of a mutual fund scheme. Think of it this way:
- AUM = Total Size of the Fund
- NAV = Price per Unit of the Fund
A fund can have high AUM but low NAV, or vice versa, depending on the number of outstanding units and market performance.
How is AUM Calculated Across Different Investment Structures?
Mutual Fund AUM Calculation
Mutual fund AUM is calculated by multiplying the NAV by the number of outstanding units across all schemes managed by the AMC.
Formula: AUM = NAV × Number of Outstanding Units (across all schemes)
AIF and PMS AUM Computation
For AIFs and PMS, AUM represents the aggregate market value of all client portfolios managed by the fund manager or PMS provider.
Calculation Method:
- Value each security at current market prices
- Add cash and cash equivalents
- Subtract any liabilities
- Sum across all client portfolios
AUM in Mutual Funds vs AIFs vs Portfolio Management Services: Key Differences
| Feature | Mutual Funds | AIFs | PMS |
|---|---|---|---|
| Minimum Investment | ₹500-₹5,000 | ₹1 crore+ | ₹50 lakhs |
| Liquidity | High (daily) | Low (lock-in periods) | Medium (varies) |
| Customization | Standardized | Limited | High |
| AUM Threshold | No specific limit | Category-wise limits | Individual portfolios |
| Regulatory Oversight | SEBI (high) | SEBI (moderate) | SEBI (moderate) |
| Fee Structure | Expense ratio | Management + carry | Fixed + performance |
Mutual Funds:
Mutual funds dominate Indian AUM with their accessibility and daily liquidity. Large-cap equity funds often exceed ₹50,000 crore in AUM, providing significant economies of scale.
AIFs:
AIF AUM typically ranges from ₹100 crore to ₹5,000 crore per fund, focusing on specialized strategies like private equity, real estate, or hedge fund approaches.
PMS:
PMS providers manage individual client portfolios, with AUM varying widely based on client base and minimum investment requirements.
Factors Affecting AUM Changes: Comprehensive Analysis
The amount of assets under management changes due to: Inflows and outflows of funds. The value of the securities in which AUM is invested. The number of dividends paid by the companies in the institution's portfolio, if reinvested and not distributed.
Understanding AUM fluctuations is crucial for investment advisors analyzing fund stability and growth prospects.
1. Market Performance Impact
Positive Market Movements:
- Equity appreciation increases AUM proportionally
- Bond price increases in falling interest rate environment
- Currency gains for international investments
Negative Market Impact:
- Market corrections reduce AUM without investor outflows
- Interest rate increases affecting bond valuations
- Sector-specific downturns impacting focused strategies
2. Investor Flow Dynamics
Inflows Contributing to AUM Growth:
- New investor subscriptions
- Additional investments from existing clients
- Systematic Investment Plans (SIP) contributions
- Institutional investor commitments
Outflows Reducing AUM:
- Redemption requests and withdrawals
- Systematic Withdrawal Plans (SWP)
- Profit-booking by investors
- Fund closure or strategy changes
3. Operational Factors
AUM-Enhancing Activities:
- Dividend reinvestment by investors
- Fund mergers and acquisitions
- New scheme launches and fund raising
- Currency appreciation for global funds
AUM-Reducing Factors:
- Distribution payments to investors
- Fund liquidations or wind-downs
- Management fee deductions
- Expense ratio impacts
Why AUM Matters: Benefits and Limitations for Investment Decision-Making
AUM as a Credibility Signal
Higher AUM often indicates:
- Investor confidence and trust
- Operational stability and resources
- Better negotiating power with brokers
- Lower expense ratios due to economies of scale
Fee Structures Tied to AUM
Most investment vehicles charge fees as a percentage of AUM:
- Mutual Funds: 0.5% to 2.5% expense ratios
- AIFs: 2-3% management fees plus 20% carry
- PMS: 1-3% fixed plus performance fees
AUM Limitations Investors Must Consider
Higher AUM doesn't guarantee:
- Better performance
- Suitable investment strategy for your clients
- Optimal fund management efficiency
- Lower risk or volatility
How Investment Advisors Can Effectively Use AUM Data
1. Screen Funds by AUM Size and Stability
For Mutual Funds:
- Large-cap funds: Prefer AUM > ₹5,000 crore for stability
- Mid/Small-cap funds: Avoid extremely large AUM that may impact flexibility
- Debt funds: Higher AUM often means better credit research capabilities
2. Evaluate AIF and PMS Provider Credibility
Key AUM-Based Evaluation Criteria:
- Track record of AUM growth and retention
- Client concentration risk (avoid over-dependence on few large clients)
- AUM stability through market cycles
- Team experiences relative to AUM managed
3. Consider AUM with Expense Ratios and Performance
Optimal Analysis Framework:
- Compare expense ratios within similar AUM ranges
- Analyze performance consistency relative to AUM growth
- Evaluate fund manager's ability to deploy large AUM effectively
Conclusion:
Understanding AUM across mutual funds, AIFs, and PMS provides investment advisors with a powerful lens for evaluating opportunities and managing client portfolios effectively. The Indian market's evolution toward ₹74+ lakh crore in mutual fund AUM alone represents unprecedented opportunities for advisors who can navigate this landscape intelligently.
At Steptrade Capital, we understand that successful investment advisory requires sophisticated analysis tools and market intelligence. Our SEBI-registered asset management platform combines AUM tracking, performance analysis, and portfolio optimization to help investment advisors deliver superior outcomes for their clients.
