Business EconomyPosted at: Dec 15 2025 3:51PM


Rising cost of education & superior returns boost investors interest in children’s mutual funds: ICRA Analytics

Kolkata, Dec 15 (UNI) Children’s mutual fund, which has clocked an impressive CAGR growth of around 21.08 per cent over the last five years, is expected to register a double-digit growth in the coming years. Rising cost of education, which has been increasing by 11–12 per cent annually, and the superior returns generated by these funds are driving parents toward market-linked instruments for long-term planning, ICRA Analytics said.
The Assets under Management (AUM) of Children’s Mutual Funds has increased by 160 per cent in the last five years to touch Rs 25,675 crore in November 2025, up from Rs 9,866 crore in November 2020. The number of folios is close to Rs 32 lakhs in Nov-2025 as against Rs 29 lakhs in Nov-2020, which clearly signals a growing interest and appetite for such funds.
There are close to 12 such funds currently available in the market and some of the top-performing funds have delivered average CAGR growth of 15-20 percent in the last three-to-five years. This has made these funds a favoured choice among parents for securing children’s education and future milestones, reflecting a clear shift from conventional savings to market-linked instruments.
“The Children’s Mutual Fund sub-category in India has witnessed strong growth in recent years, driven by rising education costs and the need for disciplined, goal-based investing. 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. Top returns from the popular schemes fund have delivered impressive returns, with some plans achieving over 30 per cent CAGR in five years,” Ashwini Kumar, senior Vice President and head market data, ICRA Analytics, said.
The average compound annualised returns (as of Nov 2025) on these funds stood at close to 4pc, 14pc and 17pc 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 per cent, reaching Rs 25,675 crore, and this momentum is expected to continue. Rising education costs, which are increasing at 11–12 per cent annually, are driving parents toward market-linked instruments for long-term planning,” Kumar said.
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.
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