AUM (Assets Under Management) is the total market value of the investments that a mutual fund scheme, AMC or mutual fund distributor manages. This is the total value of all of the investor’s holdings in the portfolio. For MFDs, AUM usually refers to the value of all client investments serviced by them and is often one of the measures of business scale and growth.

The AUM is calculated by multiplying the total units held by investors in a mutual fund scheme by the current Net Asset Value (NAV) of the scheme. The market price of underlying securities changes every day. As a result, the AUM of the fund also changes depending on the performance of investments, inflows of investors and redemptions.

The distributor commission on mutual funds is dependent on factors like the type of mutual fund, asset category, AMC and the applicable trail commission rates. In broad terms, the trail commission typically varies between 0.3 percent and 1 percent a year. So, for ₹1 crore AUM, an MFD can earn close to ₹30,000-₹1 lakh a year. Actual earnings will vary depending on the mix of products and commission structure of the distributor.