Is a fund with higher Assets Under Management (AUM) better than one with lower AUM?
The answer to this question can be yes and no. Yes, since a fund with a higher AUM means that it’s more trusted and giving higher returns and hence more investments have flowed into it. Further, a fund with higher AUM means it has more say over the prices of the stocks it owns as no. of shares shall be higher as compared to a fund with a low AUM. But at the same time one cannot judge a MF scheme by its AUM alone since the stocks held need not be top performers all the time and a smaller MF might be having a better portfolio. It’s also possible that the AUM reduces but actually the stocks held by it have appreciated. This happens mainly on account of redemptions by investors who might want to book profits. Hence, AUM alone is not a correct measure of a fund’s performance but can be used as a reference.
