On December 8, 2025, the Securities and Exchange Board of India (SEBI) issued an important circular outlining new modalities for the migration of Alternative Investment Funds (AIFs) to Accredited Investor (AI)-only schemes and easing regulations for Large Value Funds (LVFs). These changes stem from recent amendments to the SEBI (Alternative Investment Funds) Regulations, 2012, notified on November 19, 2025, aimed at simplifying compliance and enhancing operational flexibility for AIFs.
Why These Changes Matter
The AIF ecosystem has grown significantly in recent years, with sophisticated investors seeking flexible structures and smoother operational processes. SEBI’s latest amendments introduce a dedicated category of AI-only schemes, designed exclusively for Accredited Investors, who typically require fewer regulatory safeguards due to their financial sophistication. The new framework also offers additional relaxations to LVFs, improving ease of doing business for fund managers targeting high-ticket, accredited investors.
Naming Requirements for New Schemes
To ensure clarity for investors, SEBI requires any newly launched AI-only scheme or LVF to clearly reflect this in its name. For example:
- “Alpha Growth Fund – AI Only Fund”
- “XYZ Opportunities Fund – LVF”
This simple naming change helps differentiate these specialized schemes from regular AIF offerings.
Migration of Existing AIF Schemes
A key feature of the circular is that existing AIFs or their schemes can migrate to AI-only or LVF formats, provided they meet SEBI’s conditions and—most importantly—obtain unanimous positive consent from all investors.
Once conversion is completed, the AIF manager must:
- Update the scheme name to include “AI Only Fund” or “LVF”;
- Notify SEBI via email within 15 days of conversion;
- Inform depositories within 15 days to ensure alignment in their systems.
Accredited Investor Status: One-Time Test
SEBI has clarified that once an investor qualifies as an Accredited Investor at the time of joining a scheme, the investor will continue to be treated as an AI throughout the scheme’s life—even if they lose eligibility later. This avoids unnecessary disruptions and helps maintain scheme stability.
Extended Tenure for AI-Only Schemes
Under Regulation 13(5), SEBI has confirmed that AI-only schemes can be extended for a maximum of five years, which includes any extensions approved prior to conversion. This gives fund managers greater flexibility in executing long-term investment strategies.
Relaxations for Large Value Funds
SEBI has further simplified requirements for LVFs by exempting them from:
- The standard placement memorandum template
- Annual audits of placement memorandum terms
Notably, LVFs will no longer need to obtain specific waivers from investors for these exemptions. This change has also been incorporated into the relevant chapter of SEBI’s Master Circular for AIFs.
Strengthening Compliance
Trustees or sponsors must ensure that the Compliance Test Report includes confirmation of adherence to the provisions introduced in this circular, reinforcing accountability and regulatory alignment.
Effective Immediately
The circular comes into force right away and has been issued under SEBI’s statutory powers to regulate securities markets and protect investor interests.