These changes could dramatically widen access for sophisticated domestic investors. Mint explains what is changing, why it matters, and the likely impact on India’s alternative investment industry.
What are large value funds?
Large value funds are specific schemes of alternative investment funds (AIF) where every investor (excluding the manager, sponsor, and certain insiders) is an accredited investor and commits a large minimum amount.
These funds already enjoy some relaxations, such as faster scheme launches, higher single-investee limits, longer tenure extensions, and equal rights for investors with waivers.
According to the Securities and Exchange Board of India (Sebi), as of 30 June, the LVF segment comprised 62 schemes with commitments of about ₹1.34 trillion and nearly ₹60,000 crore in investments, indicating steady traction since their 2021 launch.
What has Sebi proposed?
Sebi floated a consultation paper to ease rules for LVFs for widening participation by sophisticated investors by reducing compliance costs and narrowing the gap with global practices.
Sebi has proposed the following:
- Lowering the minimum investment per investor from ₹70 crore to ₹25 crore to broaden access without diluting investor sophistication.
- Exempting LVFs from following Sebi’s standard private placement memorandum (PPM) template, which specifies the personal responsibility of investment committee members for compliance, and the need for National Institute of Securities Markets (NISM) certification for an AIF manager’s key investment team (for AIFs that run only LVF schemes).
- Removing the current cap of 1,000 investors per AIF scheme for LVFs, citing high ticket size and accredited status as safeguards.
- Allowing existing AIF schemes to convert into LVFs—if every investor meets the LVF threshold and is accredited—subject to unanimous investor consent.
The paper is open for public comments until 29 August.
Why reduce the minimum threshold from ₹70 crore to ₹25 crore?
Sebi’s working group flagged that ₹70 crore is prohibitive for many domestic institutions and family offices, especially those bound by internal diversification guidelines and insurance sector exposure caps.
Lowering the threshold to ₹25 crore is meant to expand the investable pool while keeping the bar high enough to ensure investor sophistication and negotiated protections.
“LVFs have practically been closely held funds due to the high ticket size of ₹70 crore. With the proposed reduced ticket size for LVFs, open-ended Category III LVFs may be able to benefit from the removal of this cap as they are evergreen funds,” said Nandini Pathak, partner at Bombay Law Chambers.
“This proposal should make AIFs much more accessible, especially for domestic institutions such as insurance companies and pension funds,” added Himanshu Periwal, chief operating officer at alternative asset management firm Oister Global.
He also said Sebi’s proposal was closer to the minimum investment requirements for LVFs in similar products such as portfolio management services. Given historically low onshore allocations, this change could prompt domestic institutions to start meaningfully allocating to AIFs.
Why remove the 1,000-investor cap for LVFs?
Given the large minimum commitment and participation allowed only for accredited investors, Sebi believes the numerical cap is less relevant for LVFs. Lifting it could help evergreen or scalable strategies without compromising safeguards rooted in investor sophistication and ticket size.
“The cap of 1,000 investors is generally quite liberal. Nevertheless, removing it for LVFs is certainly welcome… One can expect LVFs being more popular when these benefits are introduced,” said Vivaik Sharma, partner at Cyril Amarchand Mangaldas law firm.
“Lifting this cap will help fund managers to scale up, and could make these structures more attractive overall,” said Periwal. “With bigger, more diverse pools of money and investors, these funds can play a larger role in India’s financial markets.”
Can existing AIFs opt into the LVF regime?
Sebi has proposed permitting AIF schemes to convert into LVFs, provided every investor meets the LVF criteria, is accredited, and gives their consent.
“Allowing migration of existing schemes into LVFs is exciting since such schemes may avail flexibilities like exemption from ‘pro-rata rights’ requirement and also reduce compliance obligations by meeting a lower ticket size of ₹25 crore,” Sharma said.
Why relax the requirement for NISM certification?
Sebi proposed removing the NISM certification requirement for AIFs that run only LVF schemes as accredited investors can independently assess and negotiate manager credentials and track records, and deploy internal or external advisors for due diligence.
This mirrors the bespoke nature of large-ticket private capital globally.
Sharma said relaxing the NISM certification criteria would boost the popularity of LVFs.
“The key reason behind the suggested exemptions for managers is that it should cut down operational overhang and costs for both the funds and investors,” Periwal added.
What happens to disclosure and oversight?
Currently, some exemptions from the private placement memorandum template and annual PPM term audits kick in only when each investor commits ₹70 crore and explicitly waives those requirements.
Sebi has proposed categorical exemptions to LVFs without needing specific waivers each time, given that accredited investors already sign undertakings acknowledging risks and lower regulatory oversight.
This move is intended to streamline documentation while preserving negotiated, bespoke terms for large, sophisticated backers.
“Practically, since thresholds for accredited investors and investors who can waive the requirement of following PPM template and conducting PPM audits are the same (i.e., ₹70 crores), LVFs often request these waivers from investors,” said Sharma of Cyril Amarchand Mangaldas.
Why exempt investment committee members from personal responsibility?
Under current rules, investment committee members can be insulated from personal responsibility for compliance only in high-ticket, waiver-based contexts.
Sebi proposed extending that relief categorically to LVFs, again without needing specific waivers, so long as overall accountability remains with the fund, its manager, and key managerial persons. The idea is to facilitate the use of expert investment committees without deterring participation through personal liability risks for sophisticated, negotiated pools.
“These are good-to-have operational benefits,” said Pathak of Bombay Law Chambers, adding that the proposals partly restore pre-2020 flexibilities, now limited to LVFs.
“Sebi should have also considered allowing deal-by-deal structures for LVFs, similar to angel funds,” she suggested.
