Children's Funds surge 160%, top schemes beat equity returns, post 34% CAGR

AUM of Children's Mutual Funds surge by 160% over last five years to touch Rs 25,675 crore in November 2025

Children’s mutual funds—once a niche category—are now becoming a mainstream tool for long-term education planning in Indian households. New data from ICRA Analytics shows that assets under management (AUM) in children’s funds have surged 160% in the last five years, rising to ₹25,675 crore in November 2025 from ₹9,866 crore in November 2020. Folios too have climbed from 29 lakh to 32 lakh during the period.

 

Top-performing schemes are delivering 20–30% CAGR over three to five years—far outpacing traditional savings products.

 

Why are Children's MF becoming popular?

 

At the heart of this surge is a simple equation: education costs are rising faster than incomes, and traditional savings instruments are no longer sufficient. With private school fees rising at 11–12% annually, and higher education inflation outpacing general inflation for more than a decade, families are turning to market-linked products that can keep pace.

 

 

"There are close to 12 such funds currently available in the market and some of the top-performing funds have delivered average CAGR of 15-20 percent in the last three-to-five years. This has made these funds a favored choice among parents for securing children’s education and future milestones, reflecting a clear shift from conventional savings to market-linked instruments," said Icra Analytics in a note.

 

Children’s mutual funds sit within SEBI’s “solution-oriented” category and are designed specifically for long-term milestones such as schooling and higher education. They combine equity for growth and debt for stability, and most importantly, include a mandatory five-year lock-in or till the child turns 18. This behavioural guardrail has become a key selling point for parents who want disciplined, non-negotiable savings.

 

According to Ashwini Kumar, Senior Vice President and Head–Market Data at ICRA Analytics, “Parents increasingly prefer these funds because they combine equity and debt exposure, offer superior returns compared to traditional options like fixed deposits, and enforce long-term savings. Some plans have achieved over 30% CAGR in five years, which has significantly boosted investor confidence.”

 

The average compound annualized returns (as of Nov 2025) on these funds stood at has been close to 4%, 14% and 17% for a 1-year, 3-years and 5-years period respectively.

 

“The growth outlook for the Children’s Mutual Fund category in India is highly promising, supported by strong historical performance and evolving investor preferences. Over the past five years, the category’s AUM has surged by 160%, reaching ₹25,675 crore, and this momentum is expected to continue. Rising education costs, which are increasing at 11–12 percent annually, are driving parents toward market-linked instruments for long-term planning,” Kumar said.

 

Top 5 performing Children’s Mutual Funds 

Top 5 schemes selected on the basis of 5-year performance Returns as on November 28, 2025

  AUM and Investor Base Expand Sharply

 

Data from MFI360 Explorer shows a steady rise across both assets and investors: 

Source: MFI360 Explorer

  The pattern is unmistakable: consistent growth in AUM, followed by a breakout in folio additions over the last two years. 

“Investors are expecting the mutual fund industry to grow at a 10–18 per cent CAGR through 2033, and children’s funds, as part of this ecosystem, are likely to see double-digit annual growth. Overall, this category is poised to become a mainstream choice for goal-based investing, offering disciplined savings, tax benefits, and superior returns compared to traditional options,” Kumar added.

 

Greater financial awareness, digital penetration, and regulatory support for solution-oriented schemes will further strengthen adoption.