The Securities and Exchange Board of India (SEBI) has introduced the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2025, marking a major step toward modernizing India’s Alternative Investment Fund (AIF) ecosystem. Coming into force on their publication in the Official Gazette, these amendments sharpen the regulatory framework for accredited-investor–centric products and aim to make India’s private capital markets more efficient, flexible, and globally aligned.
Introducing the “Accredited Investors Only Fund”
At the heart of the 2025 amendment is a new category: the Accredited Investors only fund. This refers to an AIF or AIF scheme where every investor—except the manager, sponsor, or employees/directors of the fund or manager—is an accredited investor.
This change acknowledges the increasing sophistication and financial capability of accredited investors, allowing SEBI to create a lighter and more flexible regulatory regime for products tailored exclusively to them.
An important clarification is added in the explanation: this new term also includes the previously defined “large value fund for accredited investors.”
The amendment also allows existing AIFs and schemes launched prior to the notification to convert into Accredited Investors only funds, subject to conditions specified by SEBI.
Lower Threshold for Large Value Funds
SEBI has revised a key financial threshold in clause (pa) of Regulation 2.
The earlier requirement of ₹70 crore for a large value fund has now been reduced to ₹25 crore.
This is a significant democratization step within the accredited investor category, ensuring that more investors who meet accreditation norms can participate in sophisticated, larger-ticket fund structures.
As with the earlier provision, existing funds may convert into large value funds for accredited investors if they meet SEBI-prescribed conditions.
Key Compliance Flexibilities for Accredited-Investor Funds
Several compliance relaxations have been introduced exclusively for Accredited Investors only funds:
- Regulation 4 is amended so that certain eligibility conditions for fund applicants do not apply to these funds.
- Regulation 10 has been modified to exclude accredited investors from being counted toward the total number of investors in a scheme—giving managers more room in structuring their offerings.
- Regulation 13 has been updated to replace all references to “large value fund for accredited investors” with the new term “Accredited Investors only fund.”
Operational Changes for Trustees and Managers
Perhaps the most structural shift comes under Regulation 20, where SEBI introduces clear exemptions:
- Large value funds for accredited investors (now part of Accredited Investors only funds) are exempted from certain operational sub-regulations.
- A new sub-regulation (24) clarifies that in the case of Accredited Investors only funds, the manager will carry out all responsibilities traditionally assigned to the trustee.
This change reflects global best practices where sophisticated investors rely more on the manager’s fiduciary capability rather than a separate trustee layer.
AIF Landscape Ready for Its Next Phase
With these amendments, SEBI signals a strong intent to expand India’s private capital ecosystem while ensuring proportionate and risk-aligned regulation. By creating a flexible regime for accredited investors and lowering minimum thresholds, SEBI is positioning India’s AIF industry for deeper participation, innovation, and global integration.
The 2025 amendment is not just a technical regulation—it is a blueprint for a more dynamic, inclusive, and investment-friendly alternative capital market.