SEBI creates new category of 'accredited investors-only' AIFs; cuts LVF to Rs 25 crore

SEBI Chairman Tuhin Kanta Pandey

The Securities and Exchange Board of India (SEBI) has approved the creation of a new category of Alternative Investment Fund (AIF) schemes exclusively for 'Accredited Investors' (AI-only), marking a significant shift in how investor sophistication is assessed.

Currently, AIF participation is governed by minimum ticket sizes — Rs 1 crore for individuals and Rs 70 crore for Large Value Funds (LVFs). SEBI said such thresholds are an inadequate proxy for sophistication, and will instead move to an accreditation framework validated by independent agencies on the basis of objective parameters and investor acknowledgment.

Under the new framework, AI-only schemes will operate with lighter compliance requirements. They will not be subject to the existing 1,000-investor cap, will be exempt from pari-passu treatment provided investors give consent, and will be permitted longer extensions of up to five years versus two years for regular schemes.

LVFs, which by definition cater only to accredited investors, have received additional operational relaxations. These include exemptions from the standard Private Placement Memorandum (PPM) template and audit requirements, as well as a sharp reduction in the minimum investment threshold — from Rs 70 crore to Rs 25 crore.

SEBI has also outlined a glide path for transition. Existing AIFs can continue onboarding investors under current minimum commitments, while eligible funds may opt to reclassify themselves as AI-only or LVFs under the new rules.

The regulator noted that these measures, first floated in an August consultation paper, drew broad industry support. However, finer details such as the accreditation criteria and the mechanics of investor consent for differential rights were not spelt out in the release and are expected to follow in subsequent circulars.

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