Mutual Fund AUM Growth Over 3 Years: Which Categories Grew the Fastest Between February 2023 and February 2026?

Most investors check their portfolio returns. Very few step back and ask a different question: which parts of the mutual fund industry itself have grown the most, and what does that say about how Indian investor behaviour has actually changed?

Three years is the right window for that question. It is long enough to look past a single market cycle, a single RBI rate move, or a single year of gold outperforming equities. A three-year CAGR captures both sustained flows and the mark-to-market effects of asset price movements. It tells you where money genuinely went, and stayed.

Here is what AMFI data for February 2026 versus February 2023 shows, restricted to fund categories with at least ₹1 lakh crore in AUM as of February 2026. The list includes 1 debt fund category, 3 passive categories, 2 hybrid categories, and 7 active equity categories.

3-Year Mutual Fund AUM CAGR: Category-Wise Data from Feb-2023 to Feb-2026

Equity, Passive, and Hybrid Funds All Grew at Nearly the Same Rate - and That Is the Bigger Story

Let's start with the broad categories, because they set the context for everything else.

Equity funds grew at a three-year CAGR of 33.08%, with AUM rising from ₹15.02 lakh crore to ₹35.39 lakh crore. Passive funds came in at 31.91%, climbing from ₹6.64 lakh crore to ₹15.24 lakh crore. Hybrid funds tracked closely at 31.69%, moving from ₹4.87 lakh crore to ₹11.13 lakh crore.

Three structurally different categories, almost identical growth rates over three years. That is not coincidence. It reflects broad-based structural expansion in mutual fund participation, not a story driven by a single theme or category.

Debt funds did not match this pace. The primary reason is not a lack of investor interest in debt, but the quarterly cyclicality created by advance tax payouts. These create large, predictable redemptions at regular intervals through the financial year, which mechanically suppresses long-term CAGR even when underlying investor demand is stable.

Passive and hybrid funds have clearly moved from being complementary allocations in an equity-centric portfolio to being substantial investment destinations in their own right. For investors looking to understand how to select and position around passive funds in a portfolio, we have covered that in detail separately.

Gold ETFs and Multi-Asset Allocation Funds: Why These Two Categories Led the 3-Year AUM Growth Rankings

Gold ETFs grew at a three-year CAGR of 104.61%, taking AUM from roughly ₹21,400 crore to ₹1,83,325 crore. Multi-Asset Allocation Funds grew at 91.86%, rising from approximately ₹25,948 crore to ₹1,83,246 crore. Both nearly doubled in size on a CAGR basis and both crossed ₹1.83 lakh crore in AUM. The symmetry is not accidental.

Two factors explain the pace of growth in both categories.

Base effect. Both categories started from relatively small bases in February 2023. When starting AUM is modest, percentage growth is structurally amplified. A category growing from ₹20,000 crore to ₹1.8 lakh crore produces a very different CAGR than one growing from ₹2.4 lakh crore to ₹5.5 lakh crore, even if the absolute rupee addition is comparable.

Gold price appreciation. Gold prices rose sharply through 2024 and 2025, one of the strongest sustained runs for the metal in recent years. This boosted Gold ETF AUM through mark-to-market gains and drew fresh investor interest in commodity exposure as equity markets remained volatile.

Multi-Asset Allocation Funds benefited from the same dynamic. Gold is a structural component of the multi-asset mandate, and its appreciation contributed directly to MAAF returns and to fresh investor interest in a product that offered diversification across equity, debt, and commodities within one structure. Both categories were, in different proportions, gold beneficiaries.

Investors who want to understand how Gold ETFs are taxed versus other gold formats will find the rules around holding periods and capital gains rates covered in detail separately.

Why Arbitrage Funds Have Seen Structural Demand Growth in India Over the Last 3 Years

Arbitrage funds grew at a three-year CAGR of 52.44%, with AUM rising from ₹77,229 crore to ₹2,73,569 crore. For a category that was once seen as primarily institutional and niche, that is a meaningful shift in scale and breadth.

The demand is structural, not tactical. It is rooted in how arbitrage funds are taxed relative to other short-duration products:

• Arbitrage funds hold at least 65% in equity and equity-related instruments, qualifying them for equity taxation under SEBI's mutual fund classification framework
• Short-term capital gains on holdings under one year are taxed at 15%; long-term gains above ₹1 lakh are taxed at 10%
• Liquid fund and short-duration debt fund returns are taxed at the investor's applicable income tax slab, which can reach 30% or higher for those in the top bracket, plus applicable surcharge and cess
• A post-tax comparison: a 7% return from a liquid or debt fund taxed at 30% leaves roughly 4.9% in hand; the same 7% from an arbitrage fund held over one year leaves closer to 6.3%, depending on applicable thresholds

That post-tax gap is why arbitrage funds have increasingly become a preferred parking vehicle for surplus funds among institutional and HNI investors. The three-year AUM growth reflects this preference shift, not a one-off tactical rotation.

It is worth noting that returns depend on the availability of spread opportunities between the cash and futures markets. When spreads compress, returns can narrow. Investors should align their expectations and holding periods accordingly.

Why Money Market Funds Are the Only Debt Category on This List

Out of the entire debt fund universe, only money market funds appear in this analysis, with a three-year CAGR of 42.11%, taking AUM from ₹1,18,620 crore to ₹3,40,401 crore.

Money market funds invest at the short end of the yield curve, primarily in commercial papers, treasury bills, and certificates of deposit, with average portfolio maturities of around one year.

What worked in their favour was a specific rate environment. Short-term yields rose sharply from early 2023 as the RBI tightened monetary policy, making money market funds a genuine yield pickup over savings accounts and other very short-duration instruments for institutional and corporate treasury investors parking surplus funds.

As the RBI subsequently moved toward easing from 2025 onwards, yield levels moderated. But money market funds continued to attract flows given their relative stability, liquidity, and utility as a cash management tool. No other debt category in the ₹1 lakh crore-plus AUM club matched this pace over three years. That is a clear signal of where short-duration debt appetite was concentrated through this rate cycle.

Two Distinct Growth Clusters Within Active Equity Fund Categories

The seven equity categories on this list do not represent a single homogeneous trend. They split cleanly into two investor motivations.

Both clusters grew strongly, but for distinct investor reasons. What they share is that neither is a pure large-cap play.

Why Large-Cap Active Funds Are Not on This List and What It Means for Index Funds and ETFs

Large-cap active funds are absent from this analysis, and the absence is meaningful.

Investors seeking large-cap beta - participation in the broad direction of large-cap markets - have increasingly moved toward index funds and index ETFs, which offer that exposure at structurally lower cost. Active large-cap funds have historically found it difficult to consistently outperform their benchmarks after fees, where markets are relatively efficient and analyst coverage is dense. The case for active versus passive portfolio management goes deeper than just fees, and we have covered both sides of that argument separately.

Index funds grew at a three-year CAGR of 32.73%, taking AUM from ₹1,38,814 crore to ₹3,24,567 crore. Index ETFs grew at 26.54%, with AUM rising from ₹4,81,776 crore to ₹9,76,208 crore. Both carry large absolute AUM bases, and their sustained growth reflects a real and growing preference for passive routes to large-cap equity exposure.

For large-cap equity, the default choice among Indian investors appears to be gradually shifting toward passive. We looked at whether this passive shift is structural or momentum-driven in a separate piece, and the answer is more nuanced than the flow numbers suggest.

Key Takeaways

• Equity, passive, and hybrid funds all grew at nearly identical three-year CAGRs of 31% to 33%, reflecting broad-based structural expansion in Indian mutual fund participation
• Gold ETFs and Multi-Asset Allocation Funds led the field with CAGRs above 90%, driven by low starting bases and sustained gold price appreciation through 2024 and 2025
• Arbitrage funds and money market funds were the standout non-equity growth stories, each benefiting from structural advantages in taxation and yield respectively
• Within active equity, two distinct clusters drove growth: alpha-hunting funds in mid, small-cap, and thematic segments; and allocation-driven funds in multi-cap, flexi-cap, and large and mid-cap categories
• Large-cap active funds lost ground to index funds and ETFs, with passive routes now the default choice for cost-efficient large-cap equity exposure

FAQs

1. Which mutual fund category had the highest 3-year AUM CAGR between February 2023 and February 2026?

Among categories with at least ₹1 lakh crore in AUM, Gold ETFs led with a three-year CAGR of 104.61%, followed by Multi-Asset Allocation Funds at 91.86%. Both benefited from gold price appreciation and growing investor interest in commodity-linked exposure.

2. Should I read high AUM CAGR as a signal that a category will continue to grow at the same pace?

No. High historical CAGR reflects a specific set of conditions, including low starting base and favourable asset price movements, that may not repeat. Past AUM growth is not a predictor of future growth. Investors should evaluate fund categories based on their own financial goals, risk profile, and investment horizon.

3. Why are arbitrage funds growing faster than most active equity categories?

Arbitrage funds offer equity-style taxation while delivering debt-like risk levels. For investors in higher tax brackets, this post-tax advantage over liquid funds is meaningful and structural. That tax efficiency, more than return performance, has driven the category's sustained AUM growth.

4. What made money market funds outperform most other debt categories over 3 years?

RBI tightening from early 2023 pushed short-term yields higher, making money market funds more attractive for institutional and corporate treasury investors. That elevated yield environment, combined with strong liquidity and low duration risk, drove consistent inflows into the category through this period.

5. Does the 3-year AUM data mean passive funds are replacing active equity funds in India?

Not replacing, but complementing more meaningfully than before. The shift is most visible in large-cap equity, where passive index funds and ETFs are increasingly preferred over active funds. In mid-cap, small-cap, and thematic segments, active funds still dominate and continue to attract strong flows.

6. Why did hybrid funds grow as fast as equity funds over 3 years?

Multi-Asset Allocation Funds within the hybrid category grew at 91.86% CAGR, which pulled the overall hybrid category higher. Beyond that, volatile market conditions made dynamically allocated hybrid structures more attractive to investors looking for managed diversification rather than pure equity exposure.

Disclaimer: This article is for general information and educational purposes only. It does not constitute investment, tax, legal, or financial advice. All AUM figures and CAGR calculations referenced in this article are based on publicly available data published by AMFI and are subject to revision. Past AUM growth, past fund category performance, and historical CAGR figures are not indicative of future growth, returns, or performance of any mutual fund or fund category. Investors should not make investment decisions based on this article. Please consult a SEBI-registered investment adviser or a qualified financial professional before making any investment or financial decision. Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.