Children’s mutual funds fall under the solution-oriented fund category, alongside retirement funds. Despite the sharp rise in AUM, the number of schemes remains limited. There are currently around 12 children’s mutual fund schemes, compared with about 10 five years ago.
Prableen Bajpai, Founder of FinFix Research and Analytics, said growth has come mainly from existing schemes. “Only two new schemes have been launched in the last five years,” she said, adding that investor awareness is still evolving.
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According to Bajpai, nearly 78% of the total AUM is concentrated in three large schemes. These funds come with a lock-in period of five years or until the child turns 18, whichever is earlier. “The lock-in helps create discipline for long-term goals like education,” she said.
Returns across children’s mutual funds vary based on their structure. Some schemes follow a flexi-cap approach, while others are closer to hybrid strategies. Data shared on the show indicated that average three- to five-year CAGR returns for the category have ranged between 20% and 30%, depending on market exposure.
Bajpai cautioned investors against comparing one-year returns. “Equity investments should be looked at over five years or more,” she said, noting that education inflation in India is estimated at 10–12%.
While parents can build similar portfolios using flexi-cap or hybrid funds, children’s mutual funds offer goal alignment and forced discipline. Popular schemes in the category include SBI Magnum Children’s Fund, ICICI Prudential Children’s Fund, HDFC Children’s Gift Fund, Tata Children’s Fund and UTI Children’s Fund.
The category could see steady growth if awareness improves and more fund houses enter the space.
For the full interview, watch the accompanying video