#SEBIRules #AIF #AccreditedInvestor #LVF #AlternativeInvestments #CapitalMarkets #FinancialRegulation #SEBIAmendment #FundManagement #InvestmentInnovation #PrivateEquity #VentureCapital
Mumbai: The Securities and Exchange Board of India (SEBI) has introduced a set of pivotal regulatory amendments aimed at significantly bolstering India’s Alternative Investment Fund (AIF) ecosystem. These new rules create a dedicated class of funds exclusively for sophisticated investors and ease several compliance norms, fostering greater innovation and flexibility in the specialized investment space.
The regulatory changes, formally notified on November 18, 2025, through the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2025, are designed to establish a more streamlined and accommodating framework for high-ticket investors and complex, specialized fund structures. The core of this reform is the creation of the “Accredited Investors Only Fund.”
🎯 The Rise of the ‘Accredited Investors Only Fund’
The “Accredited Investors Only Fund” is a new regulatory category under the AIF framework with a stringent requirement: all investors must be accredited investors, with the explicit exception of the fund’s sponsor, manager, directors, or employees. This dedicated structure acknowledges the sophistication and risk-appetite of this investor class, allowing for tailored investment products.
In a move to unify the regulatory landscape, SEBI has subsumed the existing Large Value Funds for accredited investors (LVFs) into this new “Accredited Investors Only Fund” category. This integration creates a singular, cohesive framework for funds specifically catering to sophisticated capital. The rules also permit existing AIFs and schemes to seamlessly transition into this new unified category, provided they adhere to SEBI’s specified transition conditions.
💰 Lowering the Barrier: Revised LVF Corpus Requirement
One of the most significant and industry-welcomed changes is the substantial reduction in the minimum corpus requirement for Large Value Funds (LVFs). SEBI has dramatically cut the required fund size from $₹70 \text{ crore}$ to $₹25 \text{ crore}$. This strategic relaxation is intended to lower entry barriers for new fund managers and investment strategies, thereby improving capital mobilization efficiency for products aimed specifically at accredited investors.
The flexibility extends further by allowing existing AIFs that meet the revised norms to convert to the LVF structure. This ensures that fund managers can optimize their existing schemes to benefit from the streamlined regulations associated with the accredited investor framework.
🔄 Enhanced Flexibility and Operational Simplification
The new rules introduce critical relaxations that grant greater operational freedom to funds serving accredited investors:
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Exemption from Investment Concentration Caps: Accredited investors participating through these specialized fund categories will now be exempt from regulatory limits on investment concentration. This means fund managers can take higher-conviction bets or tailor bespoke exposures to single companies without being restricted by regulatory caps on the share of capital deployed. This acknowledges the accredited investor’s ability to assess and manage higher, concentrated risks.
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Simplified Governance: Manager Takes Over Trustee Duties: In a move to simplify governance and operational oversight, SEBI has shifted the core trustee responsibilities to the fund manager for accredited-investor-only funds. This operational shift streamlines the administrative process by consolidating oversight. Furthermore, the regulator has specifically exempted LVFs from certain governance norms under Regulation 20(8), significantly reducing the compliance burden for these sophisticated products.
📈 Industry Perspective on the Reform
Industry participants view the revised framework as a crucial step that strengthens and matures India’s alternatives ecosystem.
Subahoo Chordia, CEO, EAAA India Alternatives, emphasized the clarity these changes bring, stating that they provide investors “a clearer and more credible avenue to allocate to alternatives,” thereby supporting the maturation of India’s broader investment landscape.
Nilesh Choudhary, CEO and Founder of Aikyam Capital Group, highlighted that SEBI’s move is an “acknowledgement that accredited investors possess the sophistication to evaluate higher-risk, bespoke products.” He believes that the combination of lower corpus thresholds and streamlined governance “will encourage greater innovation in fund structures, deepen private-market participation and channel more long-term capital into India’s alternative investment ecosystem.”
In essence, these amendments mark a significant regulatory evolution, allowing for the creation of more sophisticated, agile, and high-conviction investment products specifically designed for India’s growing pool of accredited capital, positioning the country’s AIF market for accelerated growth and increased global competitiveness.
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