Children's mutual funds in India have witnessed a significant surge in popularity, with Assets Under Management (AUM) jumping by 160% in the last five years, according to a recent report by ICRA Analytics. As of November 2025, the total AUM for this category reached ₹25,675 crore, a substantial increase from ₹9,866 crore in November 2020. This growth signifies a rising preference among parents for market-linked instruments to secure their children's future financial needs, particularly education.

The increasing cost of education is a major driver behind this shift. With private school fees and higher education expenses rising at an average of 11-12% annually, traditional savings options are often insufficient to meet these escalating costs. Children's mutual funds, with their potential for higher returns, have emerged as an attractive alternative for long-term financial planning.

The number of folios in children's mutual funds has also increased, from approximately 29 lakhs in November 2020 to 32 lakhs in November 2025, indicating growing investor interest in these funds. Currently, there are around 12 such funds available in the market. These funds typically invest in a mix of equity and debt instruments, offering a balance between growth potential and risk mitigation. Moreover, children's mutual funds come with a lock-in period of five years or until the child attains the age of majority, encouraging long-term savings.

ICRA Analytics reports the average compound annualized returns as of November 2025 for children's mutual funds to be approximately 4% for a 1-year period, 14% for a 3-year period, and 17% for a 5-year period.

Here’s a look at the top 5 performers in the children's mutual fund category based on 5-year returns:

1. SBI Magnum Children's Benefit Fund: This fund has delivered the highest CAGR in the category, with returns of around 34.35% over the past five years. The fund has given 10.89% returns in the last one year and 22.85% in the last 3 years. The SBI Magnum Children's Benefit Fund - Savings Plan, has an AUM of ₹123.04 crore, with 12.15% 3-year CAGR and 14.16% 5-year CAGR.
2. ICICI Prudential Children's Fund: This fund has demonstrated strong and consistent performance. The ICICI Pru Child Care Fund - Gift Plan, has an AUM of ₹1,319.77 crore, with a 16.25% 3-year CAGR and 16.89% 5-year CAGR.
3. HDFC Children's Fund (Lock-in): Known for its consistent returns and long-term investment strategy, this fund is a popular choice among parents. The HDFC Childrens Gift Fund Regular Plan Growth has given 15.5% return in 3 years and 18.6% return in 5 years.
4. Tata Children's Fund: This fund has shown promising growth potential and is suitable for investors with a higher risk appetite. The Tata Young Citizen Fund, has an AUM of ₹366.67 crore, with a 13.04% 3-year CAGR and 19.34% 5-year CAGR.
5. UTI Children's Equity Fund: With a focus on equity investments, this fund aims to provide long-term capital appreciation. The UTI Children's Equity Fund Direct Plan Growth has given 9.6% return in 3 years and 18% return in 5 years.

According to Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, parents are showing an increasing preference for these funds due to their combination of equity and debt exposure, better returns than traditional options like fixed deposits, and the enforced lock-in period that promotes disciplined, long-term savings.

Looking ahead, the growth outlook for the children's mutual fund category remains positive. ICRA Analytics anticipates double-digit expansion in the coming years, driven by rising financial awareness, increasing digital penetration, and regulatory support for solution-oriented schemes. Investors expect the mutual fund industry to grow at a 10-18% CAGR through 2033, and children's funds are expected to become a mainstream choice for goal-based investing.