Can Sebi's accredited investor push deliver a boom?

Registration for accredited investors remains modest, according to Sebi’s September board meeting documents. While India has more than 72,000 unique AIF investors, the number of accredited investors (AIs) is “below 1,000", the documents show. The count was 649 in Sebi's June meet documents.

The regulator attributed the low count of such accredited investors (AIs) to recent relaxations and the existence of “deemed AIs," whose participation does not appear in accreditation data. However, industry executives said demand for such products is still lacklustre.

“Accredited investors are not offered a lot in India," said Ranjit Jha, managing director & chief executive officer of Rurash Financials, an asset management company. “Because India is yet to become a developed economy. Hence, we lack … exclusive investment opportunity in India for the accredited investors."

In 2021, Sebi defined an accredited investor as an individual, family trusts, sole proprietorships or partnership forms with an annual income of at least ₹2 crore, or net worth of ₹7.5 crore with minimum financial assets of ₹3.75 crore. Corporate bodies and non-family trusts with a net worth of ₹50 crore also qualify.

On 19 November, the market regulator notified amendments that AIFs can now launch funds or schemes where all investors must be accredited. The norms also allow existing AIFs to convert into accredited-only schemes and shift trustee responsibilities to the fund manager for such schemes, among several other changes.

The cap of 1,000 investors in an AIF will not apply to accredited investor-only funds.

The only advantage of being an accredited investor is the removal of the minimum investment limit. Typically, AIFs only accept investments above ₹1 crore. In 2021, the market regulator removed the investment threshold for AIs, allowing them to diversify their risks by investing small amounts in various schemes.

In the developed markets such as the US, many private capital vehicles, such as private equity, hedge funds, and venture capital, are typically sold only to accredited investors or they rely on limits that greatly favour accredited investors. AIs gain access to a wider menu of products, potentially higher returns and strategies that use leverage or complex derivatives. Such a framework does not exist in India.

“AIFs will eventually become an accredited investor-only product. But the path to get there would need coordination among Sebi, the AIF Industry, and investors," said Sidharth Pai, founding partner, chief financial officer and ESG officer at 3one4 Capital, a venture capital firm. “It needs to be frictionless and fruitful for all parties involved, to ensure mass adoption."

Others are more optimistic about the momentum the latest reforms could bring.

“Awareness was a big challenge earlier. But now that awareness is more, we are expecting accredited investor figures to pick up," said Rohit Gulati, chief executive officer at UTI Alternatives. “There should be some critical mass in terms of the number of accredited investors as I believe that AIFs will be keen to launch accredited investor-only funds once the number of accredited investors goes up".

Economies of scale could also play a part in helping boost accredited investors.

“The effort in aggregating the corpus for a fund will go down through the use of technology in investor outreach," said Asif Iqbal Khan, general counsel, Vivriti Asset Management. He said that the recent removal of the 1,000-investor cap for AIFs could combine with the lack of minimum investment requirements to create scale efficiencies.

“Earlier, investors had to invest at least ₹1 crore into a fund. But now, if they don't want that high exposure and wish to diversify, then they can allocate smaller amounts and take sophisticated bets," Khan said. He also expects accredited investors to transition from low ticket sizes to larger ones once they get acquainted with the products.

AIFs expect a lot more to be done in the segment for accreditation to pick up.

“Industry wants the regulator to add more cost-effectiveness and expand benefits for investors and AIFs," said an AMC executive on the condition of anonymity. “The lack of a minimum investment limit has also not sat well with AIFs."

The absence of a minimum limit for accredited investors could affect inflows into an AIF as, otherwise, any investor is supposed to invest a minimum of ₹1 crore.

“Currently, other than AIFs, there are no specialized products for accredited investors. Sebi may open up other products in the future," said Khan. “I’m expecting the next change could be relaxation of private placement norms for accredited investor-only funds."

By September 2025, gross capital raised by all registered AIFs crossed ₹6.36 lakh crore, with total investments made at ₹6.12 lakh crore, according to Sebi. Data for AIF inflows by AIs is not publicly available.