AUM of children’s mutual funds climbs 142% in 5 years; check top investment options here
Experts say the surge in education inflation, estimated at 11-12%, is encouraging an increasingly large number of parents to look for suitable investment avenues
- Jun 19, 2024,
- Updated Jun 19, 2024 7:36 PM IST
Assets under management (AUM) of children’s mutual fund surged nearly 142% in the past five years to Rs 20,081.35 crore in May against Rs 8,285.59 crore in May 2019. The figure witnessed a rise of around 31% on year-on-year basis.
In terms of average returns, the children’s mutual fund gained 22.64% in the last one year till May 31, 2024. On a 3-year and 5-year basis, the category delivered 14.68% and 12.71% CAGR return, respectively, according to ICRA Analytics. The returns look higher as compared to fixed deposits (as per State Bank of India), which on an average gave 6.80%, 6.75% and 6.50% returns over a 1-year, 3-years and 5-years period.
Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, the surge in education inflation, which is estimated at close to 11-12% (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 regarding mutual fund investments is contributing to a surge in AUM of these funds.
“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. Moreover, the ownership of the investment can be easily transferred once the child becomes a major and reaches adulthood. All these factors are contributing to a good growth in AUM of children’s mutual funds over the last four-to-five years,” Kumar said.
The net flows into children’s mutual funds witnessed a growth of 28%, 102% and 23% over a 1-year, 3-years and 5-years period. The number of folios has increased by around 4% at 29.93 lakh folios as of May 2024, as 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% 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% at Rs 4,433.81 crore; SBI Magnum Children’s Benefit Fund Investment Plan – Reg – Growth accounts for 12% at Rs 2,023.42 crore and UTI Children’s Equity Fund – Growth for around 6% at Rs 1,010.49 crore. The AUM of Axis Children’s Gift Fund – Lock in – Reg – Growth was at Rs 822.90 crore; SBI Magnum Children’s Benefit Fund – Savings Plan at Rs 110.77 crore; Union Children’s Fund – Reg – Growth at Rs 46.70 crore and the AUM of LIC MF Children’s Fund stood at Rs 15.70 crore as on May 2024.
“We expect the growth momentum in children’s mutual funds to sustain moving forward backed by improved risk appetite among investors due to upbeat growth prospects of the domestic economy and the increased awareness and acceptance for mutual fund investments due to higher returns generated as compared to certain other traditional sources of investment. The advent of improved technology and digital payments are likely to further facilitate the process,” Kumar added.
Assets under management (AUM) of children’s mutual fund surged nearly 142% in the past five years to Rs 20,081.35 crore in May against Rs 8,285.59 crore in May 2019. The figure witnessed a rise of around 31% on year-on-year basis.
In terms of average returns, the children’s mutual fund gained 22.64% in the last one year till May 31, 2024. On a 3-year and 5-year basis, the category delivered 14.68% and 12.71% CAGR return, respectively, according to ICRA Analytics. The returns look higher as compared to fixed deposits (as per State Bank of India), which on an average gave 6.80%, 6.75% and 6.50% returns over a 1-year, 3-years and 5-years period.
Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, the surge in education inflation, which is estimated at close to 11-12% (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 regarding mutual fund investments is contributing to a surge in AUM of these funds.
“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. Moreover, the ownership of the investment can be easily transferred once the child becomes a major and reaches adulthood. All these factors are contributing to a good growth in AUM of children’s mutual funds over the last four-to-five years,” Kumar said.
The net flows into children’s mutual funds witnessed a growth of 28%, 102% and 23% over a 1-year, 3-years and 5-years period. The number of folios has increased by around 4% at 29.93 lakh folios as of May 2024, as 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% 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% at Rs 4,433.81 crore; SBI Magnum Children’s Benefit Fund Investment Plan – Reg – Growth accounts for 12% at Rs 2,023.42 crore and UTI Children’s Equity Fund – Growth for around 6% at Rs 1,010.49 crore. The AUM of Axis Children’s Gift Fund – Lock in – Reg – Growth was at Rs 822.90 crore; SBI Magnum Children’s Benefit Fund – Savings Plan at Rs 110.77 crore; Union Children’s Fund – Reg – Growth at Rs 46.70 crore and the AUM of LIC MF Children’s Fund stood at Rs 15.70 crore as on May 2024.
“We expect the growth momentum in children’s mutual funds to sustain moving forward backed by improved risk appetite among investors due to upbeat growth prospects of the domestic economy and the increased awareness and acceptance for mutual fund investments due to higher returns generated as compared to certain other traditional sources of investment. The advent of improved technology and digital payments are likely to further facilitate the process,” Kumar added.