SEBI Circular: Modalities for Migration to AI-Only Schemes and Relaxations for Large Value Funds (LVFs)
Background
SEBI has amended the SEBI (Alternative Investment Funds) Regulations, 2012 through the Third Amendment Regulations, 2025, with the objective of enhancing ease of doing business for AIFs.
Pursuant to these amendments, SEBI has issued a circular detailing the modalities for migration of existing schemes to AI-only schemes and additional relaxations for Large Value Funds (LVFs) catering to Accredited Investors.
Key Highlights of the Circular
1. Introduction of AI-Only Schemes
A separate category of AIF schemes has been introduced exclusively for Accredited Investors (AIs).
These AI-only schemes are provided scheme-specific regulatory flexibilities, including reduced compliance requirements related to investor protection.
2. Additional Relaxations for Large Value Funds (LVFs)
SEBI has extended operational and compliance relaxations to LVFs targeting Accredited Investors.
LVFs are now exempt from:
Following the standard Placement Memorandum (PPM) template
Annual audit of PPM terms
These exemptions apply without requiring specific investor waivers.
3. Mandatory Naming Convention
Any new scheme launched as:
an AI-only scheme must include “AI only fund” in its name
a Large Value Fund must include “LVF” in its name
Examples:
“XYZ AI Only Fund”
“ABC LVF”
4. Migration of Existing Schemes to AI-Only or LVF
Existing AIFs or schemes launched prior to November 19, 2025 may migrate to:
AI-only schemes, or
LVF schemes
Conditions for migration:
Positive consent from all existing investors
Fulfilment of eligibility criteria as specified by SEBI
Post-migration compliance requirements:
Update scheme name to include “AI only fund” or “LVF”
Report the conversion to SEBI via email at aifreporting@sebi.gov.in within 15 days
Notify depositories within 15 days for system updates
5. Continuity of Accredited Investor Status
If an investor qualifies as an Accredited Investor at the time of onboarding, such status will continue for the entire life of the scheme, even if the investor later ceases to meet AI criteria.
6. Scheme Tenure Extension for AI-Only Schemes
Maximum permissible extension for AI-only schemes is five years in total, including:
any extensions granted prior to conversion from a non-AI scheme
7. Compliance Reporting
Trustees or sponsors must ensure that the Compliance Test Report includes confirmation of compliance with this circular, as required under Chapter 15 of the AIF Master Circular.
Effective Date
This circular comes into force with immediate effect.
Legal Authority
Issued under Section 11(1) of the SEBI Act, 1992, read with Regulations 2(1)(ac), 2(1)(pa), and 36 of the AIF Regulations, to protect investor interests and promote orderly development of the securities market.