Market capitalisation of a fund depends on the kind of stocks a fund invests in. It is not same as assets of a fund
21-Aug-2013 •Research Desk
Please help me understand the difference between 'market capitalisation' and 'assets' of a mutual fund.
Assets of a mutual fund is simply the NAV of the fund multiplied by the units which gives the market value of the money under management of the fund.
Assets of a fund don't have any bearing on the market cap of the fund. A Rs 1,000 crore fund can have the same market cap as that of a Rs 500 crore fund if both have invested in the same stocks in the same proportion. The market cap depends on the kind of stocks that a fund invests in. Similarly, two index funds tracking Sensex will also have the same market cap.
Technically, market capitalisation of a fund gives the weighted market cap of the fund, i.e., in what type of stocks -- large, mid or small -- it has invested. The weighted market capital of an equity fund shows that large-cap funds will have a higher market cap compared to those holding mid and small cap stocks. It is calculated by taking the geometric mean of market cap of the stocks raised to the power of stock's respective weight in the portfolio.