India’s Children’s Mutual Fund category has grown by over 21 per cent in the last five years, driven primarily by rising education costs and superior long-term returns, according to a report by ICRA Analytics.
New Delhi: Children’s mutual funds in India have recorded strong growth of about 21.08 per cent over the past five years and are expected to continue expanding at double-digit rates, driven primarily by rising education costs and improving investor awareness, according to a report by ICRA Analytics released on Monday.
The report noted that education expenses have been increasing by 11–12 per cent annually, prompting parents to shift towards market-linked investment options for long-term financial planning. Superior returns offered by children’s mutual funds have further boosted their appeal.
Assets under management (AUM) in the children’s mutual fund category surged 160 per cent over five years to ₹25,675 crore in November 2025, compared with ₹9,866 crore five years earlier. The number of folios also increased to around 32 lakh from about 29 lakh during the same period.
At present, 12 children’s mutual fund schemes are available in the market. The top-performing funds have delivered an average compounded annual growth rate (CAGR) of 15–20 per cent over the past three to five years. The best-performing scheme recorded returns of 34.35 per cent over five years, 22.85 per cent over three years and 10.89 per cent in the past year.
“Parents increasingly prefer these funds because they combine equity and debt exposure, offer superior returns compared to traditional options like fixed deposits, and enforce a lock-in period of five years or until the child turns 18, promoting long-term savings,” said Ashwini Kumar, Senior Vice-President and Head of Market Data at ICRA Analytics.
Average returns in the category stood at about 4 per cent for one year, 14 per cent for three years, and 17 per cent for five years. The report added that the mutual fund industry is expected to grow at a CAGR of 10–18 per cent through 2033, with children’s mutual funds likely to emerge as a mainstream option for goal-based investing.
Rising financial literacy, increased digital adoption and regulatory support for solution-oriented schemes are expected to further drive growth in the segment.
IANS
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