AUM stands for Asset under management
It simply refers to the entire amount of money that a manager is in charge of.
AUM is the cumulative amount of money that a mutual fund owns. It contains the present value of all securities or shares (in case of equity), fixed income securities (in case of debt) or both (in case of hybrid) the mutual fund has purchased, as well as the amount of cash on hand (reserved funds kept for surprises such as a sudden good buying opportunity or a sudden large request for withdrawal from investors).
Unrelated assets can also be invested with a tiny percentage of the AUM. Some equity funds, for example, invest a small percentage of their assets in debt instruments if the fund manager believes it would increase returns or decrease risk.
AUM in India often ranges from 100s to 1000s of crores of rupees. AUM of certain big mutual funds ranges from Rs 10,000 to Rs 15,000 crores.
AUM isn’t only limited to Mutual funds.
Some people refer to it as fund size.
How does AUM Increases?
AUM may increase in two ways.
First, if the assets of the mutual fund increase. When the value of the stocks, bonds, or other assets owned by a mutual fund rises, the AUM rises as well. The NAV rises as a result of this, while the number of units remains same.
Second, if additional money is invested in the mutual fund. The NAV is unaltered in this situation, and the number of units is raised in order to accommodate new investors.