Date: 2025-12-08Category: Not ApplicableState: Union GovernmentCountry: India
Modalities for migration to AI only schemes and relaxations to Large Value Funds for Accredited Investors under SEBI (Alternative Investment Funds) Regulations, 2012
**Executive Summary**
This circular, issued by the Securities and Exchange Board of India (SEBI) on December 08, 2025, outlines the modalities for migrating Alternative Investment Funds (AIFs) to AI-only schemes and provides relaxations to Large Value Funds (LVFs) for accredited investors. These changes are in accordance with amendments to the AIF Regulations of 2012, notified on November 19, 2025. The circular is effective immediately.
**Key Points / Main Content**
* **AI-Only Schemes and LVFs:**
* Facilitates a separate category of AIF schemes exclusively for Accredited Investors (AI-only schemes), with regulatory flexibility and less compliance around investor protection.
* Extends additional relaxations and operational flexibilities to Large Value Funds (LVFs) for accredited investors.
* New AI-only schemes or LVFs must include "AI only fund" or "LVF" in their name, respectively.
* **Conversion of Existing AIFs:**
* Existing eligible AIFs/Schemes of AIFs can convert to AI-only schemes or LVF schemes with investor consent and meeting specified conditions.
* Upon conversion, the AIF manager must change the scheme name to incorporate "AI only fund" or "LVF."
* The conversion and name change must be reported to SEBI via email (aifreporting@sebi.gov.in) and to depositories within 15 days of conversion.
* **Investor AI Status:**
* If an investor is an accredited investor (AI) at the time of joining an AIF scheme, they will be considered an AI throughout the scheme's life.
* **Extension of AI-Only Schemes:**
* The maximum permissible extension for AI-only schemes is five years, including any tenure extended before conversion.
* **Exemption for LVFs:**
* LVFs are exempt from the standard placement memorandum template and annual audit requirements.
* Paragraph 8 of SEBI circular SEBI/HO/IMD/DF6/CIR/P/2020/24 dated February 05, 2020, is subsumed in para 2.4.4. in Chapter 2 of Master Circular for AIFs dated May 7, 2024.
* **Compliance:**
* The trustee/sponsor of AIF must ensure that the 'Compliance Test Report' includes compliance with the provisions of this circular.
**Impact Analysis**
**Stakeholder: All Alternative Investment Funds (AIFs)**
**Impact:** AIFs are subject to new rules regarding AI-only schemes and LVFs, including name changes, reporting requirements, and compliance with the updated regulations.
**Action Required:** AIFs need to assess their eligibility for conversion to AI-only schemes or LVF schemes, obtain investor consent, implement necessary changes to scheme names, and report changes to SEBI and depositories within the specified timelines. They must also ensure compliance with the provisions of the circular in their 'Compliance Test Report'.
**Stakeholder: Managers of AIFs**
**Impact:** Managers are responsible for implementing the changes outlined in the circular, including obtaining investor consent, changing scheme names, and reporting to SEBI and depositories.
**Action Required:** Managers need to establish procedures for obtaining investor consent, modifying scheme names, submitting reports to SEBI and depositories, and ensuring ongoing compliance with the updated regulations.
**Stakeholder: Accredited Investors (AIs)**
**Impact:** Accredited investors can participate in new AI-only schemes and benefit from relaxations applicable to LVFs.
**Action Required:** AIs should review the terms and conditions of AI-only schemes and LVFs before investing.
Key Entities Referenced
SEBI (Alternative Investment Funds) Regulations, 2012: The primary regulations governing Alternative Investment Funds in India. This circular modifies these regulations.
Alternative Investment Funds (AIFs): The investment funds directly impacted by the circular, specifically regarding migration to AI-only schemes and relaxations for Large Value Funds.
Large Value Funds (LVFs): A category of AIFs that receive specific relaxations under this circular.
Accredited Investors (AIs): Investors who are eligible to participate in AI-only schemes. The circular introduces Al-only schemes.
Securities and Exchange Board of India (SEBI): The regulatory body issuing the circular and overseeing the AIF market.
CIRCULAR
HO/19/34/11(5)2025-AFD-POD1/I/188/2025 December 08, 2025
To,
All Alternative Investment Funds (AIFs)
Sir/Madam,
Sub: Modalities for migration to AI only schemes and relaxations to Large
Value Funds for Accredited Investors under SEBI (Alternative Investment
Funds) Regulations, 2012
1. With an objective to enhance ease of doing business for Alternative
Investment Funds (“AIFs”), Securities and Exchange Board of India
(Alternative Investment Funds) Regulations, 2012 (‘AIF Regulations’), have
been amended and notified on November 19, 2025 to:
1.1. facilitate introduction of a separate category of AIF schemes, limited
exclusively to Accredited Investors only (AI-only schemes), and offering
the scheme specific regulatory flexibilities in terms of less compliance
around investor protection.
1.2. extend additional relaxations and operational flexibilities to Large Value
Funds (LVFs) for accredited investors.
2. Any new scheme proposed to be launched as an AI only scheme or LVF shall
have the words ‘AI only fund’ or ‘LVF’ added to the scheme name at the end,
respectively (For example, ‘Xyz AI only fund’ and ‘Abc LVF’).
3. In terms of Regulation 2(1)(ac) & 2(1)(pa) of AIF Regulations, AIF or a
scheme of an AIF, launched prior to the notification of Securities and
Exchange Board of India (Alternative Investment Funds) (Third Amendment)
Regulations, 2025, may be permitted to convert to an AI-only scheme or LVF
scheme, subject to the conditions as may be specified by the Board.
4. In this regard, it is specified that existing eligible AIFs/Schemes of AIFs may
convert/ migrate to AI only schemes/ LVF schemes subject to obtaining
positive consent from all the investors and meeting the respective conditions.
Upon conversion, the manager of the AIF shall ensure that –
4.1. the name of the converted scheme is changed to incorporate ‘AI only
fund’ or ‘LVF’ as the case may be;
4.2. such conversion and change in name of the scheme is reported to SEBI
by emailing to aifreporting@sebi.gov.in within 15 days of the conversion;
and,
4.3. such change in name of the scheme is reported to depositories for
carrying out necessary changes in their system within 15 days of the
conversion.
Page 1 of 25. In respect of the AI status of an investor, if an investor is an AI at the time of
on-boarding into an AIF scheme, he/ she shall be reckoned as an AI through
the life of the scheme, even if he/ she were to lose such status in the interim.
6. In terms of Regulation 13(5) of AIF Regulations, it may be noted that
maximum extension permissible for AI only schemes shall be of five years,
inclusive of tenure extended, if any, prior to conversion to AI-only scheme /
LVF scheme.
7. Further, it has been decided to exempt LVFs from following the standard
template of placement memorandum and annual audit of the terms of
placement memorandum, without requirement of specific waivers from
investors. Accordingly, para 8 of SEBI circular
SEBI/HO/IMD/DF6/CIR/P/2020/24 date February 05, 2020, subsumed in para
2.4.4. in Chapter 2 ("Filing of Private Placement Memorandum and related
compliance requirements") of Master Circular for AIFs dated May 7, 2024,
insert below mentioned text as clause 2.4.4. (iii):
(iii) Large Value Funds as defined in AIF Regulations, without the requirement
of obtaining specific waiver from investors.
8. The trustee/sponsor of AIF, as the case may be, shall ensure that the
‘Compliance Test Report’ prepared by the manager in terms of Chapter 15 of
Master Circular for AIFs, includes compliance with the provisions of this
circular.
9. This circular shall come into force with immediate effect.
10. This circular is issued with the approval of the competent authority.
11. This circular is issued in exercise of powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992, read with Regulations
2(1)(ac), 2(1)(pa) and 36 of AIF Regulations, to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market.
12. The circular is available on SEBI website at www.sebi.gov.in under the
categories "Legal framework - Circulars" and "Info for - Alternative Investment
Funds”.
Yours faithfully,
Anshul Jagdish Goyal
Deputy General Manager
Tel no.: +91-22-26449389
anshulg@sebi.gov.in
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