Can I invest in mutual fund schemes with good returns but meagre AUM?
Yes, but look at how long the fund manager has been there and what he thinks. I would say that investors stand a superior chance of deriving superior returns from a relatively smaller fund than from a large fund.
There is something called winner's curse. A fund starts small, does well, more people put in their money, it becomes large and eventually become difficult to manage and replicate its performance. So, if you are able to spot a fund which is small and has done very well, there is no disadvantage in investing in it. I think there are disadvantages only when funds turn big.