SEBI Eases Regulations for AIFs: Modalities for AI-Only Schemes and Relaxations for Large Value Funds

In a significant move aimed at enhancing the ease of doing business for Alternative Investment Funds (AIFs), the Securities and Exchange Board of India (SEBI) has amended the AIF Regulations, 2012 through its notification dated 19 November 2025. The amendments introduce a tailored regulatory framework for Accredited Investor–only schemes (AI-only schemes) and provide substantial operational relaxations for Large Value Funds (LVFs).

1.        Introduction of AI-Only AIF Schemes

SEBI has enabled the launch of AI-only schemes, which are restricted solely to Accredited Investors. These schemes will enjoy greater regulatory flexibility and reduced investor-protection-linked compliances, acknowledging the sophistication and risk-bearing capacity of Accredited Investors.

2.        Additional Relaxations for LVFs

To further support large-ticket investments, SEBI has extended additional operational flexibilities to Large Value Funds (LVFs) that cater specifically to Accredited Investors. LVFs can now operate with lighter disclosure and compliance requirements.

3.        Naming Requirements for New Schemes

All new schemes launched under these categories must clearly reflect their nature in the scheme title:

1. “AI only fund” for AI-only schemes

2. “LVF” for Large Value Funds

   For example: “Xyz AI only fund” or “Abc LVF”.

4.        Migration of Existing AIF Schemes

AIFs or their schemes launched before the 2025 amendment may convert to AI-only or LVF schemes, provided they:

1. Obtain positive consent from all existing investors, and

2. Satisfy the conditions specified by SEBI.

Upon conversion, the manager must:

1. Update the scheme name to reflect “AI only fund” or “LVF”.

2. Report the conversion to SEBI within 15 days.

3. Notify depositories within 15 days for system updates.

 5.        Continuity of Accredited Investor Status

Once an investor is onboarded as an Accredited Investor, they will be treated as an AI for the entire life of the scheme, even if they lose AI status later. This ensures operational continuity and avoids repeated verification.

6.        Scheme Tenure Extensions

AI-only schemes may avail a maximum extension of up to five years, inclusive of any extensions granted prior to conversion.

7.        Compliance Relaxations for LVFs

SEBI has exempted LVFs from:

1. Using the standard template of the Private Placement Memorandum, and

2. The requirement of annual audit of the terms of the placement memorandum, without needing specific investor waivers.

This change has been incorporated into the Master Circular for AIFs (May 7, 2024) as clause 2.4.4(iii).

8.        Updated Compliance Reporting

Trustees or sponsors must ensure that the Compliance Test Report (CTR) prepared by the AIF manager includes confirmation of adherence to the new provisions introduced through this circular.

Source: SEBI | Modalities for migration to AI only schemes and relaxations to Large Value Funds for Accredited Investors under SEBI (Alternative Investment Funds) Regulations, 2012