How a mutual fund’s AUM impacts returns: Should investors worry when it grows too large?

In the last five years, the mutual fund industry's assets under management (AUM) have more than doubled from around ₹ 40 lakh crore to ₹ 85 lakh crore. During the same time, the AUM of individual schemes has also increased. For some schemes, AUM has multiplied and become so large that questions are being raised about whether it will affect scheme returns. Should investors worry when the AUM is too large? In this article, we will examine the performance of some schemes that are the largest in their category.

Over the years, the ‘Mutual Funds Sahi Hai’ campaign has done wonders for the industry. The campaign has created the necessary awareness among retail investors about investing in mutual funds. Retail investors have firmly adopted the Systematic Investment Plan (SIP) route of investing in mutual funds. The SIP investment numbers have not just sustained over the years, but have gone from strength to strength.

It has led to overall growth in the mutual fund industry and in individual schemes within the industry. Over time, some schemes have grown so large that some investors wonder whether scheme size will impact the returns. So, let us look at the performance of some schemes with the highest AUM in their respective category.

Let us start with the ICICI Prudential Large Cap Fund, the largest in the large-cap category, with an AUM of ₹ 80,960 crore.

Note: Data as of 14 August 2026. The 1-year returns are absolute. The 3-, 5-, and 10-year returns are CAGR.

The table above shows that the scheme’s performance has lagged the overall category and the BSE 100 TRI performance in the last one year. However, over the 3, 5, and 10-year periods, the scheme has consistently outperformed the large-cap category and the BSE 100 TRI.

In the mid-cap category, the HDFC Mid Cap Fund is the largest, with an AUM of ₹ 1,05,143 crore.

Note: Data as of 14 August 2026. The 1-year returns are absolute. The 3-, 5-, and 10-year returns are CAGR.

The table above shows that the scheme outperformed the BSE 150 MidCap TRI in the last one year, but lagged the mid-cap category by a couple of percentage points. However, over the last 3, 5, and 10-year periods, the scheme has consistently outperformed the mid-cap category and the BSE 150 MidCap TRI.

In the small-cap category, the Nippon India Small Cap Fund is the largest, with an AUM of ₹ 78,957 crore.

Note: Data as of 14 August 2026. The 1-year returns are absolute. The 3-, 5-, and 10-year returns are CAGR.

The table above shows that the scheme outperformed the BSE 250 SmallCap TRI in the last one year, but lagged the small-cap category by a couple of percentage points. However, over the last 3, 5, and 10-year periods, the scheme has consistently outperformed the small-cap category and the BSE 250 SmallCap TRI. Over the 5 and 10-year periods, the scheme’s outperformance margin is around 5%, which is quite decent.

The scheme’s strong returns and consistent outperformance compared to the small-cap category and the BSE 250 SmallCap TRI attracted many investors. As the scheme’s AUM grew and opportunities to deploy investor money reduced, subscriptions were limited.