SEBI Issues Modalities for Migration to AI-Only Schemes & New Relaxations for Large Value Funds (LVFs)
SEBI has released a new circular outlining the operational framework for AI-only schemes and granting additional relaxations to Large Value Funds (LVFs) under the AIF Regulations. These changes, notified on November 19, 2025, aim to improve ease of doing business for AIFs while introducing a separate class of investor-specific flexible schemes.
1. Introduction of AI-Only Schemes
SEBI has enabled AIFs to launch schemes exclusively for Accredited Investors (AIs), with reduced investor-protection compliance requirements and greater operational flexibility.
New schemes must include “AI only fund” in their scheme name.
2. Additional Flexibility for Large Value Funds (LVFs)
LVFs for Accredited Investors will now benefit from extended regulatory relaxations intended to enhance their operational freedom.
New LVF schemes must include “LVF” in the scheme name.
3. Migration of Existing AIF Schemes
AIFs or their schemes launched prior to the Third Amendment (2025) may shift to an AI-only scheme or LVF, subject to:
• Positive consent from all existing investors
• Meeting all other applicable conditions
Upon conversion, the manager must:
Update the scheme name to include “AI only fund” or “LVF”
Report the conversion to SEBI at aifreporting@sebi.gov.in within 15 days
Notify depositories within 15 days for system updates
4. Accredited Investor Status Retention
If an investor qualifies as an Accredited Investor at onboarding, they will continue to be treated as an AI throughout the life of the scheme — even if they lose AI status later.
5. Tenure Extension Rules for AI-Only Schemes
AI-only schemes may be extended for a maximum of five years, including any extensions already taken before conversion.
6. Relaxation from PPM Template & Audit Requirements for LVFs
LVFs are now exempt from:
• Using the standard Placement Memorandum (PPM) template
• Annual audit of PPM terms
These exemptions apply without requiring investor waivers.
7. Compliance Test Report (CTR) Update
Trustees/Sponsors must ensure that the CTR (as required under Chapter 15 of the AIF Master Circular) includes compliance with the provisions of this circular.
Effective Date
The circular comes into force immediately.
SEBI has issued this under Section 11(1) of the SEBI Act and Regulation 36 of the AIF Regulations.