16.8 Few FAQs

Financial derivatives

What is ‘AUM’?

Assets Under Management (AUM) is the total value of assets managed by an AMC in one or all the plans. For example, total assets in a single fund are the funds or assets managed by the AMC and the total value of all the assets in all the plans is the total assets managed by AMC. The sum of all the AUM of all the AMCs is the total AUM in the mutual fund industry. In other words, AUM is the market value of assets that an investment company manages on behalf of investors. Assets under management (AUM) are looked at as a measure of success against the competition and consists of growth/decline due to both capital appreciation/ losses and new money inflow/outflow.

What is an NFO?

New Fund Offer (NFO) is the new fund offered by the mutual fund company inviting the general public or investors to subscribe to the units of its new scheme or plan with pre-stated investment style, objectives, constraints and other related information. It is similar to an IPO in primary market of shares. But in an NFO there is no limit on number of units. NFO is the primary market for mutual funds.

Is there a secondary market for mutual funds?

The units of closed-ended funds are traded in a stock exchange and in the case of open-ended funds the units can be bought and sold with the company itself between the timings prescribed by the company which is fund specific.