The Securities and Exchange Board of India (SEBI) has proposed regulatory changes to encourage Accredited Investors (AIs) in Alternative Investment Funds (AIFs). The proposals include creating a separate category of “AI-only schemes” with lighter investor protection requirements, given that AIs are considered financially sophisticated. Key flexibilities include exemption from pari-passu norms, extension of fund tenure up to five years, relaxation from NISM certification for fund managers, removal of the 1,000-investor cap, and revised trustee responsibilities for AI-only schemes. SEBI also proposes additional benefits for Large Value Funds (LVFs), such as lowering the minimum investment from ₹70 crore to ₹25 crore, exemption from standard placement memorandum (PPM) templates and audits, and release of investment committee members from certain responsibilities. Existing AIFs may convert into AI-only or LVF schemes with investor consent. These steps aim to gradually shift risk assessment from the current minimum commitment threshold to accreditation status. While most stakeholders support AI-only schemes and reduced entry barriers for LVFs, some have urged retention of co-existing eligibility metrics and suggested improvements in the accreditation process. SEBI emphasizes that the transition will be gradual, balancing investor protection with operational flexibility, while promoting ease of doing business for AIFs and expanding participation from accredited investors.
Securities and Exchange Board of India
Proposals to give a regulatory fillip to Accredited Investors in AIFs
1. Objective
With an objective to enhance ease of doing business for AIFs, this Board Memorandum proposes to amend the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), to:
A. introduce a separate type of AIF scheme for only Accredited Investors (AIs) with certain flexibilities over regular AIFs;
B. provide below mentioned additional relaxations/ flexibilities to Large Value Funds (“LVFs”):
I. Reduce the minimum investment amount in Large Value Funds for Accredited Investors (LVFs”) from INR 70 crores to INR 25 crores, and
II. Provide exemption from (i) following the standard template of PPM (ii) mandatory requirement of annual audit of the terms of PPM (iii) responsibility of members of investment committee set up by Manager of AIF to approve decisions of AIF.
C. Provide an option to existing eligible AIF schemes to avail the benefits available to the AI only schemes/ LVFs by converting themselves as AI only schemes/ LVF schemes, subject to meeting conditions specified by SEBI.
A. Introduction of a separate type of AIF scheme for only Accredited Investors
A. 1. Pooled investment vehicles play a crucial role of channelizing risk capital towards enterprises in need of risk capital. AIFs, being privately pooled investment vehicles, connect sophisticated investors having higher risk appetite than retail investors, with enterprises in need of risk capital. In comparison to other pooling vehicles like Mutual Funds, AIFs give more flexibility to investors and fund managers and are intended to take relatively higher investment risk.
A2. IFs pool money from sophisticated investors, institutional investors or corporates through private placement, without soliciting money from retail investors. Accordingly, in terms of AIF Regulations 2012, minimum commitment from each investor in a scheme of a typical AIF is stipulated at INR 1 crore. Therefore, ‘minimum commitment threshold’ has been used as a metric to ascertain risk sophistication of an investor.
A.3. However, there are certain shortcomings with respect to the minimum commitment threshold metric to ascertain risk sophistication of investors. For one, the current minimum commitment amount of INR 1 Crore per investor in a scheme of AIFs considered as a measure of risk sophistication, was stipulated in 2012. Further, the commitment offered by an investor may not necessarily be a parameter of the investor’s financial health (as against income or net-worth criteria). There is a possibility of investors being inclined to put majority of their wealth in AIFs, which are, by design, a riskier investment asset class. Accordingly, suitability of commitment model, as the metric to ascertain risk sophistication of investors in AIFs may warrant a review.
A. 4. n 2021, SEBI introduced a detailed framework on “Accredited Investor” by way of amendment to SEBI (AIF) Regulations 2012 thereby laying down objective metric for ascertaining ‘sophisticated investor’, in addition to the existing metric via size of investment. With this, the requirement of minimum investment size was removed for an Accredited Investor. Further, various modalities with respect to the accreditation framework were specified vide SEBI circular dated August 26, 2021 [subsumed in Chapter 12 of Master Circular for AIFs dated May 07, 2024 (‘master circular’)].
A.5. As per Regulation 2 (ab) of AIF regulations, the eligibility criteria to become an Accredited Investor, which are independently verified by the accreditation agencies, is as under:
“Accredited Investor” means any person who is granted a certificate of accreditation by an accreditation agency who,
i. in case of an individual, Hindu Undivided Family, family trust or sole proprietorship has:
a. annual income of at least two crore rupees; or
b. net worth of at least seven crore fifty lakh rupees, out of which not less than three crores seventy-five lakh rupees is in the form of financial assets; or
(c) annual income of at least one crore rupees and minimum net worth of five crore rupees, out of which not less than two crore fifty lakh rupees is in the form of financial assets.
ii. in case of a body corporate, has net worth of at least fifty crore rupees;
iii. in case of a trust other than family trust, has net worth of at least fifty crore rupees;
iv. in case of a partnership firm set up under the Indian Partnership Act, 1932, each partner independently meets the eligibility criteria for accreditation:
Provided that the Central Government and the State Governments, developmental agencies set up under the aegis of the Central Government or the State Governments, funds set up by the Central Government or the State Governments, qualified institutional buyers as defined under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, Category I foreign portfolio investors, sovereign wealth funds and multilateral agencies and any other entity as may be specified by SEBI from time to time, shall be deemed to be an Accredited Investor and may not be required to obtain a certificate of accreditation.
A 6. Accredited Investors are considered to be a class of investors who have an understanding of various financial products and the risks-returns associated with them and hence, are able to take informed decisions regarding their investments. They are also perceived to be well-advised, due to their ability to hire expert managers/ advisors and well-informed with sufficient financial acumen.
A 7. In terms of clause 12.2 of Chapter-12: “Framework for Accredited Investors” of AIF Master Circular, Accredited Investors are required to provide the following undertaking while availing services of Investment Service Providers (‘ISPs’), that is, AIFs, Portfolio Managers and Investment Advisers:
i. The prospective investor ‘consents’ to avail benefits under the AI framework.
ii. The prospective investor has the necessary knowledge and means to understand the features of the investment product/service eligible for Accredited Investors, including the risks associated with the investment.
iii. The prospective investor is aware that investments by Accredited Investors may not be subject to the same regulatory oversight as applicable to investment by other investors.
iv The prospective investor has the ability to bear the financial risks associated with the investment.
A8. A third-party validated framework that accredits investors based on certain objective metrics as outlined above, better compliments the regulatory philosophy that AIFs as an investment product is meant for sophisticated investors.
A9. Accordingly, investments by Accredited Investors may not be subject to the same prudential norms and regulatory oversight as applicable to investments by other investors.
A10. Considering the above, there are certain relaxations to Accredited Investors and/ or ISPs for onboarding Accredited Investors under the respective SEBI Regulations. A brief of the same is placed at Annexure A. In this direction, it is pertinent to note that the SEBI Board has recently approved reliance on the accreditation status of investors while offering a more flexible framework for investing in angel funds and in the flexible framework for co-investing in unlisted securities of investee companies of AIFs through co-investment vehicles (CIV). Recently, SEBI has further recognized accreditation as a metric of risk sophistication under SEBI Mutual Funds Regulations in the newly introduced Specialised Investment Funds (SIFs), where no ticket size has been mandated for accredited investors.
A.11. While there are over 72,000 unique investors in AIFs as of June 20205, it is recognized that the number of explicitly registered Accredited Investors is, at present, modest at below 1,000. This may be attributed to the fact that many relaxations/ opportunities extended exclusively to Accredited Investors (angel funds framework, CIV, SIFs etc.) are fairly recent, and hence, would take some time to bear fruit in terms of increased accreditation numbers. Also, certain types of investors have been given deemed Accredited Investor status, which would not reflect in the number of investors who have been accredited by the accreditation agencies. Also, several proposals are under active consideration to streamline and ease the process of accreditation for investors. Thus, the number of Accredited Investors is expected to grow given the regulatory focus and the efforts being undertaken in this area.
A.12. In continuation to this regulatory approach, it may be appropriate to consider a gradual transition from ‘minimum commitment threshold’ to ‘accreditation status’ as a metric of risk sophistication of an investor. Accordingly, as a long term vision, it is envisaged that AIF schemes shall have investor base constituting of only Accredited Investors (“AI only schemes”). While it is viewed that this should be the norm/eligibility to invest in AIFs, implementing the same immediately may be disruptive to the current AIF ecosystem. Thus, a glide path approach may be adopted where AIF schemes continue to onboard investors based on minimum commitment threshold, and additionally a separate type of AIF scheme i.e. AI only schemes may be introduced.
Proposed flexibilities for AI only schemes –
A.13. AIF regulatory framework, apart from aiming to protect interest of investors, also aims to ensure that:
i. Appropriate disclosures are made to the investors;
ii. Various systemic risks are mitigated;
iii. Misconduct by intermediaries is deterred;
iv. Conflict of interest issues are addressed;
v. AIFs are not structured for the purpose of circumvention of other laws.
The above objectives are aimed to ensure that AIFs function in an orderly fashion and integrity of securities market is maintained.
A.14. As mentioned above, from the viewpoint of investor protection, investments by Accredited Investors may not be subject to the same prudential norms and regulatory oversight as applicable to investments by other investors. Accordingly, if the investor base of an AIF scheme constitutes exclusively of Accredited Investors (AI only schemes), it is proposed that regulations centred around investor protection can be eased, while the provisions pertaining to other regulatory objectives as mentioned in Para A.1 3 above may remain intact. As a thrust towards accreditation ecosystem, the proposal to extend flexibilities aims to incentivize AIFs to launch more AI only schemes.
Consultation with stakeholders
A.15. An agenda in this regard was discussed in Alternative Investment Policy Advisory Committee (AIPAC) of SEBI. AIPAC noted that Accredited Investors are considered to be a class of investors who have an understanding of various financial products and the risks-returns associated with them and hence, are able to take informed decisions regarding their investments. Accordingly, AIPAC recommended the proposal to introduce ‘AI only schemes’ with less regulatory emphasis around investor protection as compared to regular AIFs.
A.16. Accordingly, SEBI issued a consultation paper dated August 8, 2025, inviting public comments till August 29, 2025 (copy placed as Annexure-B), proposing to introduce a separate type of AIF scheme for only Accredited Investors. A total of 20 entities have commented on the proposals in the consultation paper. Brief summary of public comments received and SEBI’s views on the same are placed at Annexure-C.
A.17. Taking into account the recommendations of AIPAC, public comments received on the consultation paper and internal deliberations, specific issues on the subject have been discussed in paragraphs below.
Proposal A1: Introduction of AI only schemes
A.18. As a regulatory measure to provide fillip to accreditation, it is proposed that a separate type of AIF scheme may be introduced where investor base shall consist of only Accredited Investors (“AI only schemes”).
A.19. As discussed above, while it is viewed that accreditation should be the norm/ eligibility to invest in AIFs, implementing the same immediately may be disruptive to the current AIF ecosystem. Accordingly, it is proposed that a glide path approach may be adopted. While regular AIF schemes continue to onboard investors based on minimum commitment threshold, AIF managers may be given a flexibility to launch AI only schemes to avail certain key flexibilities with respect to a lighter regulatory regime around investor protection.
A. 20 .While there is unanimous agreement on introducing AI only schemes, some comments have raised concerns over long term vision of having only ‘accreditation’ as a metric of risk sophistication of investors in AIF ecosystem.
A. 21. total of 20 entities have commented on the proposal regarding long term vision of having only accredited investors in the AIF ecosystem. In this regard, 12 entities have favoured the proposal, while 8 entities have disagreed with the proposal.
A.22. The dissenting commenters have argued for continued co-existence of ‘minimum commitment’ and ‘accreditation’ as metrics of risk sophistication of investors. The commenters have also made certain suggestions on improving the accreditation framework such as skill/ knowledge based accreditation, clarification on continued flexibilities during the tenure, and streamlining of accreditation process.
A.23. In this regard, it is reiterated that a gradual transition is envisaged from ‘minimum commitment threshold’ to ‘accreditation status’ as the only metric of risk sophistication of an investor. Further, such transition shall be implemented in a phased manner, based of success/ impact of AI only schemes, traction in accreditation and after due consultation with the relevant stakeholders.
A.24. As regards the concerns around accreditation itself, it is submitted that the framework for accreditation was brought in to identify sophisticated investors in the market and provide them lighter regulatory regime based on their financial capability. An independent third-party validation ensures credibility in risk sophistication of an investor, on the basis of which flexibilities in AIF ecosystem are extended/ proposed to be extended. It is envisaged that flexibilities extended to AIFs shall be extended as whole, and not in a fragmented manner. Accordingly, it is desirable, in the long term, that all schemes of AIFs have their investor base constituting of accredited investors.
A.25. Accordingly, the public comments on long term vision of ‘accreditation status’ as the only metric of risk sophistication are noted for consideration.
A.26. s regards the proposal on introducing AI only schemes in the interim, a total of 18 entities have commented on the proposal. 17 entities have favoured the proposal, and 1 entity has disagreed with the proposal. The disagreeing commenter has argued for continued co-existence of both metrics, which has been discussed in the above paragraphs.
A.27. Taking into account the recommendations of AIPAC, public comments received on consultation paper and internal deliberations, it is viewed that a separate type of AI schemes may be introduced where investor base shall constitute of only Accredited Investors (“AI only schemes”), with certain flexibilities as discussed below.
Proposal A2: Exemption from Pari-Passu norms
A.28. As mentioned in Para A13-A14, it is proposed that AI only schemes may be extended certain flexibilities from investor protection viewpoint, considering that investor base of an AIF scheme constitutes exclusively of well-informed Accredited Investors. The subsequent paragraphs enlist such flexibilities proposed to be extended to AI only schemes.
A.29. Presently, in terms of Regulation 20 (22) of AIF Regulations, the rights of investors of a scheme of an AIF shall be pari-passu in all aspects i.e. differential rights offered to select investors of a scheme of an AIF shall not affect the interest of other investors of the scheme. This condition has been exempted for Large Value Funds (LVFs) on the basis that LVF constituents are all Accredited Investors with minimum INR 70 crore commitment amount, and the investors are highly risk sophisticated, have necessary risk appetite, capability and a full-fledged system to carry out independent due-diligence and monitoring of the investments.
A.30. Extending the same principle, AI only schemes may also be exempted from the requirement of maintaining pari-passu rights among investors, subject to a waiver provided by each investor to this effect.
A.31. A total of 18 entities have commented on the proposal, and have agreed with the proposal.
Proposal A3: Increased limit for extension of tenure
A.32. Presently, as per Regulation 13(5) of AIF regulations, extension of the tenure of close ended AIFs is permitted up to 2 years subject to approval of two-thirds of the unit holders by value of their investment in the AIF. It has often been argued that funds with sophisticated investors could be permitted to extend the scheme, if the investors see further value in the investments and do not necessarily want to exit at the end of fund’s originally agreed tenure. In this regard, it is proposed that AI only schemes may be permitted to extend term up to 5 years, subject to requisite investor consent, as is the case with LVFs.
A. 33. A total of 19 entities have commented on the proposal. In this regard, 18 commenters have agreed with the proposal.
A. 34. Only 1 commenter has disagreed with the proposal stating that this clause is largely in favour of fund managers and that Indian investors are not prepared for such long tenure products and that it will reduce attractiveness of AIFs. It could be a situation in which extension veils underperformance for a longer period. Even though the extension can be done with only two-thirds majority, it can often be detrimental to individual investors.
A. 35. In this regard, it may be noted that tenure and possible extension is required to be disclosed to the investors at the time of on boarding. Thus, investors are aware of the investment horizon prior to investing in the funds. Further, two-third majority of the investors shall also give consent for extension of tenure, if any.
A. 36. Furthermore, all AIFs already have the flexibility to extend tenure by up to two years, subject to investor consent. Considering that the investors in AI only scheme are perceived to be more financially aware, the tenure extension is proposed to be permitted up to 5 years, subject to investor consent. Therefore, the suggestion of the commenter may not be accepted.
Proposal A4: Exemption from NISM certification
A.37. In terms of Regulation 4(g)(i) of AIF Regulations, the key investment team of the Manager of an AIF is mandated to have at least one key personnel with relevant certification as may be specified by SEBI from time to time, as an eligibility criterion for obtaining certification of registration as an AIF.
A.38. Since AI only schemes are meant for investors who are perceived to be capable of conducting independent and adequate due diligence while investing in AIFs, including the assessment of credentials and track record of the manager and its key investment team, it is felt that NISM certification criteria for such AIFs having AI only schemes, may not be required.
A.39. The proposal was also part of consultation paper on ‘providing flexibilities to LVFs’ dated August 8, 2025. As it was a common proposal, the comments made therein have also been included in analysis below.
A.40. A total of 23 entities have commented on the proposal. In this regard, majority of commenters (18/23) have agreed with the proposal. A few commenters (5/23) have argued that NISM exam ensures a baseline level of knowledge for fund management, and hence should continue to be mandated.
A.41. In this regard, as majority of the commenters are in favour of the proposal, and since the investor base consists of only accredited investors who are perceived to be capable to take sound decision regarding capabilities of the investment manager prior to making investments, it is felt that NISM certification criteria for such AIFs having AI only schemes, may not be required. Accordingly, the suggestions may not be accepted.
A.42. Further, based on the suggestion received on the consultation paper, it is proposed that the relaxation may be extended at each scheme level instead of at AIF level.
Proposal A5: Removal of restriction on maximum no. of investors
A.43. The extant regulatory framework stipulates that no scheme of AIF (except for angel funds) shall have more than 1000 investors. Considering that investor base of an AI only fund is proposed to consist of Accredited Investors only, the above restriction on number of investors i.e. 1000 may not be relevant.
A.44. The proposal was also part of consultation paper on ‘providing flexibilities to LVFs’ dated August 8, 2025. As it was a common proposal, the comments made therein have also been included in analysis below.
A.45. A total of 23 entities have commented on the proposal and majority of the entities are in agreement with the SEBI proposal. One entity has suggested that the restriction need not to be done away with entirely, instead a higher threshold such as a 5000 investor limit may be considered as a more balanced approach.
A.46. In this regard, it is viewed that any cap on the number of investors in a scheme can be bypassed by the Fund by launching further schemes to accommodate increased investors’ interests. Also, there is no rationale spelt out for suggesting the cap as 5,000 investors. Accordingly, the comment in this regard may not be accepted.
A.47. Similarly, extending the same rationale, it is proposed that in commitment-based (non-AI only scheme) AIF schemes, the scheme may be required to adhere to the limit of 1,000 investors after excluding all AIs.
Proposal A6: Reviewing trustee responsibilities for AIFs in trust form
A.48. In case an AIF is incorporated in form of a trust, AIFs have a three-tiered structure viz., sponsor, manager and trustee. In accordance with Indian Trusts Act 1882, the trustee holds property of trust for the benefit of beneficiaries of the trust and is responsible for managing and administering the trust property in accordance with the terms of the trust deed and for acting in the interest of the beneficiaries. Further, AIF Regulations also cast certain responsibilities on the trustee (solely or jointly with manager) to enable them to have oversight over the operations of the fund and the manager.
A.49. These responsibilities were cast on trustee primarily from an investor protection viewpoint. Hence, in case of AI only schemes, such responsibilities under AIF Regulations may be fulfilled by the manager itself, subject to terms of agreement between the AIs and the manager as captured in the fund documents.
A.50. A total of 17 entities have commented on the proposal. In this regard, 13 entities have favoured the proposal, and 4 entities have disagreed with the proposal.
A.51. Few commenters have expressed dissent on the said proposal stating that, having an independent entity (the trustee) to act in the interest of beneficiaries provides an important safeguard, ensuring that the fund is managed appropriately and in compliance with regulations. These comments are mainly pivoted on the aspects of investor protection and independent oversight.
A52. As already established above, the idea behind the flexibilities being extended to AI only funds is that, these investors have necessary capability to negotiate terms to protect their interests in the fund and thus, regulatory measures/ safeguards from investor protection point of view may be relaxed for such funds. The commenters have also reiterated that the role of trustee is primarily from investor protection. By a logical extension, the aforesaid flexibility is proposed. This is also expected to reduce compliance related reporting by managers to trustee, and in the process, improve operational efficiency of the fund. Note that if the AI only scheme is under a Trust structure, the responsibility as cast under the Indian Trusts Act, 1882, will continue to rest with the trustee.
A.53. Further, while commenters have pointed out independent oversight, the extant AIF Regulatory framework does not specify any norms with respect to independence of the trustee, from the sponsor or manager. Thus, it is viewed that the aforesaid comments do not merit consideration.
B. Providing relaxations / flexibilities to Large Value Funds for Accredited Investors
B.1. LVFs are AIFs or schemes of an AIF in which each investor (other than Manager, Sponsor, employees or directors of AIF or employees or directors of the Manager) is an Accredited Investor (“AI”) and invests not less than INR 70 crore. Details of LVF schemes are tabulated below:
| No. of LVF schemes |
No. of investors | Commitment Raised (INR crore) |
Funds Raised (INR crore) |
Investments Made (INR crore) |
|
| 62 | Domestic Investors | Foreign Investors | 1,34,752 | 60,788 | 58,963 |
| 78 | 25 | ||||
(Data as on June 30, 2025)
B.2. As all LVF schemes are AI only schemes, if approved by the Board, flexibilities proposed for AI only schemes shall also be available to LVF schemes. Since investors in LVFs are large AIs and commit significantly higher amount, they are perceived to be even more sophisticated with higher financial acumen as compared to investors of above proposed AI only schemes. Considering the same, it is appropriate that LVF schemes have flexibilities over and above those available to AI only schemes.
B.3. Note that the below mentioned flexibilities proposed for AI only schemes are already available to LVFs:
a. LVF schemes of closed ended AIFs can extend tenure upto 5 years, subject to requisite investor consent.
b. LVFs are exempted from the requirement of maintaining pari-passu rights among investors, subject to obtaining requisite investor waiver.
B.4. Further, in accordance with the rationale given in favour of LVFs in para B.2. above, below mentioned relaxations have been provided to the LVFs under AIF Regulations, which have not been proposed for AI only schemes:
a. LVFs are exempted from filing their PPM with SEBI through Merchant Banker.
b. LVF schemes can be launched under intimation to SEBI by filing the PPM with SEBI before the launch of the scheme i.e. without waiting for the comments of SEBI.
c. Portfolio diversification requirement are relaxed for LVFs such that, LVFs of Category I and II may invest up to 50% (in place of 25%) of the investable funds in a single investee company and LVFs of Category III may invest up to 20% (in place of 10%) of the investable funds in a single investee company.
B.5. Furthermore, based on industry feedback and internal deliberations, it is felt that certain more flexibilities may be extended to LVFs to make them an attractive option for accredited investors with a relatively higher ticket size.
Recommendations of the EoDB Working Group:
B.6. SEBI had set up an Ease of Doing Business Working Group (“EoDB WG”) to review compliance requirements under AIF Regulations and provide recommendations with the objective to simplify AIF Regulations and to reduce cost of compliance to AIF industry.
B.7. In respect of extant LVF framework, the EoDB WG highlighted certain issues (refer Annexure D) and gave its recommendations. A summary of EoDB WG recommendations in this regard are as under:
a. The minimum ticket size in LVFs be reduced, ideally to INR 10 crore, or
b. SEBI may clarify that the INR 70 crores threshold can be computed on a ‘group’ basis i.e. collectively between the investor plus their relatives (if the investors are individuals), associates and related parties (where investors are non-individuals), as applicable.
Consultation with stakeholders:
B.8. Taking into account the recommendations of the EoDB WG and internal deliberations, an agenda was placed in AIPAC proposing below mentioned relaxations / flexibilities to LVFs:
a. Reduction of the minimum investment amount from INR 70 crores to INR 25 crores.
b. Exemption from (i) following the standard template of PPM (ii) mandatory requirement of annual audit of the terms of PPM (iii) casting responsibility on members of investment committee set up by Manager of AIF to approve investment decisions of AIF, and
c. Provide an option to existing eligible AIF schemes to avail the benefits available to the LVFs by converting themselves as LVF schemes, subject to meeting conditions specified by SEBI including appropriate investor consent(s) to migrate to LVF.
B.9. AIPAC agreed with the proposals mentioned above. Accordingly, SEBI issued a consultation paper dated August 8, 2025, inviting public comments till August 29, 2025 (copy placed as Annexure-E). A total of 24 entities have commented on the proposals in the consultation paper. Brief summary of public comments received and SEBI’s views on the same are placed at Annexure-F.
B.10. Taking into account the recommendations of EoDB WG, AIPAC, public comments and internal deliberations, specific issues on the subject have been discussed in paragraphs below.
Issues for consideration and proposals
Proposal B1- Reduction of minimum investment amount in LVFs from INR 70 crore to INR 25 crore
B.11. Accredited investors are considered sophisticated enough to understand the risks associated with investment products and also have the ability to negotiate the necessary risk mitigation norms with the investment provider in their client agreements.
B.12. Data related to existing LVF schemes as stated in para B.1 above indicates that there has been significant traction in the LVF space ever since its introduction in August 2021. However, to further facilitate channelizing long term and sizable investments particularly in unlisted securities, reduction of the extant threshold of investment merits consideration.
B.13. The accredited investors that are institutional in form, have substantial assets under management and have professional investment teams capable of due diligence and risk assessment. Therefore, lowering the minimum threshold to INR 25 crore for LVF scheme is expected to broaden the investor base without compromising on the level of investor sophistication. Further, lower entry barriers would facilitate improved fund raising for AIFs.
B.14. A total of 24 entities have commented on the proposal. Out of 24 entities, 22 entities have favoured the proposal to reduce the minimum investment amount from INR 70 crores to INR 25 crores. Two dissenting entities have, inter-alia, suggested that:
a. the removal of Accredited Investor certification requirement will help popularize the Large Value Funds.
b. threshold should be Rs 10 crores to align with the SEBI (Portfolio Managers) Regulations, 2020 (‘PMS Regulations’) and to compensate the reduction, eligibility criteria for accredited investors may be increased.
c. the calculation of minimum investment limits in LVFs may be made on group basis i.e. investors plus their relatives if investors are individuals and associates and relatives if investors are non-individuals as applicable.
B.15. In respect of the above-mentioned suggestions provided by commenters, following views may be noted, respectively:
a. With regard to suggestions of removal of accreditation certification requirement, it may be noted that, accreditation certificate is issued by accreditation agencies after verification of income and or net worth of an entity. An independent third-party validation ensures credibility in risk sophistication of an investor, on the basis of which flexibilities are extended to ISPs. Long term vision of SEBI is to provide gradual transition from ‘minimum commitment threshold’ to ‘accreditation status’ as a metric of risk sophistication of an investor. Thus, the commenter’s suggestion of removal of accreditation certification requirement may not be accepted.
b. As regards aligning the threshold level of accredited investors in AIF with that of PMS, it may be noted that, PMS and AIF are different investment products and are meant to cater to different set of investors. AIFs, being privately pooled investment vehicles, connect sophisticated higher risk appetite investors, with enterprises in need of risk capital. In comparison to PMS and other pooling vehicles like Mutual Funds, AIFs give more flexibility to investors and fund managers, and are intended to take relatively higher risk.
Considering the relaxations/ flexibilities provided to LVF schemes, lowering the minimum threshold to INR 25 crore is expected to broaden the investor base without compromising on the level of investor sophistication. In view of the above, suggestion to align the threshold for accredited investors in AIF and PMS to INR 10 crore, may not be accepted.
c. In respect of suggestion for considering the calculation of minimum investment limits in LVFs on a group basis, it may be noted that, as mentioned in para B.1 above, the traction in LVF space has improved ever since its introduction in August 2021. EoDB WG also has suggested to calculate the minimum investment limits at group level as alternate measure if the minimum threshold limits i.e. INR 70 crore is not reduced. Further, shareholding among group companies may change over time and any calculation of such limits on group basis will pose monitoring challenges. Therefore, suggestion may not be accepted.
B.16. Taking into account the recommendations of EoDB WG, AIPAC, public comments and internal deliberations, it is viewed that the minimum investment amount in LVFs may be reduced from INR 70 crore to INR 25 crore.
Proposal B2- Exemption from requirements to follow standard template of PPM and annual audit of the terms of PPM, without requirement of specific waivers from investors
B.17. As per clause 2.4.4 of Master Circular for AIFs dated May 07, 2024, AIFs/ Schemes in which each investor commits to a minimum capital contribution of INR 70 crore and provides a waiver to the fund is, inter-alia, exempted from the requirement of PPM in the SEBI specified template and from annual audit of terms of PPM.
B.18. Since LVF’s investors commit a large amount (presently stipulated as minimum commitment of INR 70 crore, proposed to be reduced to INR 25 crore in the proposal B1 above), and are also accredited investors, they are perceived to be sophisticated investors with professional investment teams capable of due diligence and risk assessment on their behalf. Therefore, it is felt that the aforesaid exemptions may be extended to LVFs. Further, since the investors in LVFs already provide an undertaking as mentioned in the para A.7 above, LVFs may be exempted to obtain a specific waiver from investors for this purpose. The EoDB WG also recommended the same.
B.19. A total of 22 entities have commented on the proposal and only 02 entities have disagreed on the above proposals. However, one entity has stated that template of PPM shall remain a basic broad framework and should exist and other entity has not provided rationale for disagreement.
B.20. In respect of suggestion for continuing with the PPM format for LVFs, it may be noted that in LVFs is restricted only to accredited investors who understand the risks of investing in AIFs especially LVFs and may not need as extensive disclosures as provided in the standard AIF PPM format.
B.21. Taking into account the recommendations of EoDB WG, AIPAC, public comments and internal deliberations, it is viewed that LVFs may be exempted from the requirement to follow template PPM as specified by SEBI and from annual audit of terms of PPM, without a specific waiver from investors for this purpose.
Proposal B3- Exemption from responsibility cast on members of Investment Committee set up to approve decisions of AIF, without requirement of specific waivers from investors
B.22. In terms of Regulation 20(8) of AIF Regulations, for AIFs/ Schemes wherein each investor (barring few exceptions) commits to minimum INR 70 crore and provides a specific waiver, members of the investment committee (“IC”) are not responsible for ensuring that the decisions of the IC are in compliance with the laid down policies and procedures. Consequently, in such cases, responsibility for investment decisions are of the AIF, manager of AIF and their KMPs.
B.23. Considering the rationale mentioned at para B.18 above, it is felt that the aforesaid exemption may also be provided to LVFs. Further, since the investors in LVFs already provide an undertaking as mentioned in the para A.7 above, LVFs may also be exempted to obtain a specific waiver from investors for this purpose. EoDB WG also recommended the same.
B.24. A total of 19 entities have commented on the proposal and only one entity has disagreed on the above proposals, however no rationale has been provided for disagreement.
B25. Taking into account the recommendations of EoDB WG, AIPAC, public comments and internal deliberations, it is viewed that the members of IC of LVFs may be exempted from Regulation 20(8) of the AIF Regulations without an explicit waiver from investors.
Proposal B6- Transition option to existing eligible AIFs
B.26. With a view to optimize the benefits of the above proposals, it is viewed that, existing AIF schemes whose investors meet the threshold for minimum commitment specified for LVFs, and are also accredited investors, may be permitted to avail the benefits available to LVFs, subject to consent obtained from all such investors in this regard.
B.27. A total of 19 entities have commented on the proposal all have favoured the proposal.
B.28. Taking into account the recommendations of EoDB WG, AIPAC, public comments and internal deliberations, existing AIF schemes may be given an option to convert themselves as LVF schemes and avail the benefits available to the LVFs, provided each investor of existing schemes meets the minimum threshold amount specified for LVFs and are AIs, and subject to consent obtained from all the investors in this regard.
B.29. On the same vein, a similar option may also be provided for conversion of an existing AIF scheme to AI only scheme, subject to meeting conditions specified by SEBI.
2. Proposal to the Board:
2.1. Taking into account the recommendations of EoDB WG, AIPAC, public comments and internal deliberations, it is proposed that AIF Regulations may be suitably amended to:
2.1.1. Introduce a separate type of AIF scheme that on-boards only Accredited Investors (AI only schemes).
2.1.2. Exempt AI only schemes from Pari-Passu norms.
2.1.3. Permit AI only schemes of close ended AIFs to extend tenure up to 5 years, subject to requisite investor consent.
2.1.4. Exempt AI only schemes from certification requirement mandated for key investment team of Manager.
2.1.5. Remove the restriction on maximum number of investors in schemes where each investor is an accredited investor. Further, for commitment-based (non-AI only scheme) AIF schemes, the scheme may be required to adhere to the limit of 1,000 investors after excluding all AIs.
2.1.6. Shift the responsibilities and obligations cast on trustee of an AI only fund to its manager.
2.1.7. Reduce the minimum investment amount in LVFs from INR 70 crores to INR 25 crores.
2.1.8. Exempt LVFs from responsibility of members of investment committee set up by Manager of AIF to approve decisions of AIF, without requirement of specific waivers from investors.
2.1.9. Provide an option to existing AIF schemes to avail the benefits extended to AI only schemes / LVF schemes, by converting themselves as AI only schemes / LVF schemes, subject to meeting conditions specified by SEBI including appropriate investor consent.
2.2. The proposals as specified above shall come into force from the date of notification of amendment in this regard.
2.3. It is proposed to specify the following by way of issuance of circular:
2.3.1. LVFs are exempted from following the standard template of placement memorandum and annual audit of the terms of placement memorandum, without requirement of specific waivers from investors.
2.3.2. Existing eligible AIFs may convert/ migrate as AI only schemes/ LVF schemes subject to obtaining positive consent from all the investors and meeting specified conditions.
2.3.3. If an investor is an AI at the time of on-boarding into an AIF, he/ she shall be reckoned as an AI through the life of the scheme, even if he/ she were to lose such status in the interim.
2.4. Upon adoption of the above proposals, the AIF framework would broadly be bucketed in terms of the following three structures:
| Commitment based schemes | AI only schemes | LVF schemes |
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2.5. The draft amendment to AIF Regulations and the draft notification for the proposed amendment are placed at Annexure G and Annexure H respectively.
2.6. The Board is requested to consider and approve the proposals as in the Memorandum and authorize the Chairperson to make consequential and incidental changes and take necessary steps to give effect to the decisions of the Board.
Enclosures:
1. Annexure A (02 page) – Relaxations extended to accredited investors under extant SEBI Regulations.
2. Annexure B (01 pages) – SEBI consultation paper dated August 08, 2025 to introduce a separate type of AIF scheme for only Accredited Investors.
3. Annexure C (09 pages) – Brief summary of public comments received on consultation paper to introduce a separate type of AIF scheme for only Accredited Investors and SEBI’s views.
4. Annexure D (01 pages) – Issues highlighted by EoDB WG in extant LVF framework.
5. Annexure E (01 pages) – SEBI consultation paper dated August 08, 2025 on providing flexibilities to LVFs.
6. Annexure F (07 pages) – Brief summary of public comments received on consultation paper on providing flexibilities to LVFs and SEBI’s views.
7. Annexure G (01 pages) – Proposed draft amendment to SEBI (Alternative Investment Funds) Regulations, 2012.
8. Annexure H (01 pages) – The draft notification for the proposed amendment.
