Sebi notifies rules to convert AIFs into accredited-investor funds

The Securities and Exchange Board of India (Sebi) has laid out a formal framework to allow existing alternative investment funds (AIFs) to be converted into accredited investor-only funds (AI-only funds) or large value funds (LVFs).

In a circular released on Monday, the markets regulator formalized the process for AIFs wishing to launch new AI-only funds or LVFs, or convert existing schemes into these categories. All such schemes must explicitly include the phrase ‘AI only fund’ or ‘LVF’ in their name.

The circular comes into effect immediately and compliance is mandatory for all fresh launches and conversions of existing schemes. Existing AIF schemes may migrate to an AI-only or LVF structure provided they obtain consent from all investors and comply with the conditions mentioned in the circular.

The circular follows amendments to the Sebi (Alternative Investment Funds) Regulations, 2012, notified on 19 November 2025, which introduced a separate category of AIF schemes restricted to accredited investors. These AI-only schemes are permitted to operate with scheme-specific regulatory flexibility. The amendments also extended additional relaxations to LVFs, which are already available only to accredited investors.

An LVF is an AIF for accredited investors with a minimum investment of ₹25 crore. As such investors are deemed sophisticated, LVFs have lighter regulatory requirements and greater operational flexibility than regular AIF schemes.

Ranjit Jha, managing director and chief executive at Rurash Financials, an AIF, said, "Sebi is giving AIFs a sandbox to experiment in. The industry can expect more regulatory changes moving forward, which will help AIFs grow."

He added, “The relaxation for LVFs is important as audits can sometimes take a long time, delaying placements for such funds.”

Accredited-investor status

The circular also clarifies how accredited-investor status will be treated over the life of a scheme. If a person qualifies as an accredited investor at the time of onboarding, they will continue to be deemed so for the entire life of the scheme, even if they lose their accredited status in the meantime. The move is in line with Sebi’s wider push for accreditation in the AIF space. The regulator’s goal is to ensure all investors in such funds are accredited.

Sebi also specified that the maximum extension for AI-only schemes will be five years. This cap includes any extensions already granted prior to conversion from a regular AIF scheme into an AI-only or LVF structure.

The regulator also exempted LVFs from having to use the standard placement memorandum template, and from an annual audit of the terms of the placement memorandum. Importantly, these exemptions do not require individual investor waivers, marking a notable increase in operational flexibility for LVFs.