Assets under Management (AUM) of children’s mutual fund more than doubled in the last five years to touch ₹20,081 crore last month against ₹8,286 crore in May, 2019.

On a year-on-year basis, the AUM increased 31 per cent from ₹15,375 crore in May, 2023, according to ICRA Analytics.

Interestingly, the children’s MF has witnessed a category average CAGR returns of 23 per cent and 15 per cent over a one and three-year period respectively, said ICRA Analytics.

The returns are significantly higher than SBI fixed deposit of 6.80 per cent and 6.75 per cent paid in the same period.

Ashwini Kumar, Senior Vice President, ICRA Analytics said the surge in education inflation, which is estimated at close to 11-12 per cent (almost twice the country’s inflation rate), is encouraging an increasingly large number of parents to look for suitable investment avenues to fund their children’s education.

The attractive rate of returns coupled with the growing awareness among parents on mutual fund investments is contributing to a surge in AUM of these funds, he added.

Children’s MFs come with a lock in period of 5-years or more to inculcate a disciplined investing and savings habit for investors and discourages withdrawals.

The exposure to both equity and debt results in diversification which helps to mitigate risk that arises out of individual stock pricing and helps maximise returns. Moreover, the ownership of the investment can be easily transferred once the child becomes a major and reaches adulthood.

The net flows into children’s mutual fund witnessed a growth of 28 per cent and doubled over one and three year period.

There are about eight children’s mutual funds with HDFC Children’s Gift Fund accounting for nearly 52 per cent of the total AUM of ₹9,019 crore as of May-end.

The growth momentum in children’s MFs to sustain moving forward backed by improved risk appetite among investors due to upbeat growth prospects of the domestic economy, Kumar added.