The Assets under Management (AUM) of children’s mutual funds has witnessed nearly 142 per cent surge in the last five years to touch Rs 20,081.35 crore in May 2024, up from Rs 8,285.59 crore in May 2019. On a year-on-year basis, the AUM increased by nearly 31 per cent from Rs 15,375.40 crore in May 2023, reveals a report by ICRA Analytics.
Interestingly, the children’s mutual fund as on May 31, 2024 has witnessed a category average compound annual growth rate (CAGR) returns of 22.64 per cent, 14.68 per cent and 12.71 per cent over a 1-year, 3-years and 5-years period respectively. The returns are significantly higher as compared to fixed deposits which on an average gave 6.80 per cent, 6.75 per cent and 6.50 per cent returns over a 1-year, 3-years and 5-years period.
Talking about the report, Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, said that the surge in education inflation, which is estimated at close to 11-12 per cent is encouraging an increasingly large number of parents to look for suitable investment avenues to fund their children’s education. “Children’s mutual funds come with a lock-in period of 5-years or more and this inculcates 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,” Kumar added.
Furthermore, the net flows into children’s mutual funds witnessed a growth of 28 per cent, 102 per cent and 23 per cent over a 1-year, 3-years and 5-years period. The number of folios has increased by around 4 per cent at 29.93 lakh folios as of May 2024, against 28.83 lakh in May 2019.
There are around eight children’s mutual funds available in the market at present and of them, the AUM of HDFC Children’s Gift Fund is among the highest accounting for nearly 52 per cent of the total AUM of children’s mutual funds at Rs 9,018.60 crore as on May 2024. UTI Children’s Hybrid Fund accounts for around 25 per cent at Rs 4,433.81 crore; followed by SBI Magnum Children’s Benefit Fund Investment Plan with 12 per cent at Rs 2,023.42 crore and UTI Children’s Equity Fund for around 6 per cent at Rs 1,010.49 crore.
As of May 2024, the AUM of Axis Children’s Gift Fund growth was at Rs 822.90 crore; SBI Magnum Children’s Benefit Fund – Savings Plan at Rs 110.77 crore; Union Children’s Fund at Rs 46.70 crore and the AUM of LIC MF Children’s Fund stood at Rs 15.70 crore.