Modalities for Migration to Schemes of AI-Only Funds and Relaxations to LVFs under AIF Regulations

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Jan 30, 2026

Modalities for Migration to Schemes of AI-Only Funds and Relaxations to LVFs under AIF Regulations

To operationalise the Amendments notified on November 18, 2025, SEBI issued a Circular on December 8, 2025, setting out the conditions for migration of existing AIFs to AI-Only Funds or LVFs, as applicable. Key aspects of the Circular are summarised below:

i. Eligibility: An existing AIF which meets the definition of an AI-Only Fund scheme or an LVF, as the case may be, is eligible to migrate. The criteria are: (a) for AI-Only Fund schemes, all investors (other than the manager, sponsor, employees or directors of the AIF or employees or directors of the manager) must be AIs; and (b) for LVFs, in addition to satisfying criterion (a) each AI must have invested at least INR 250 million (approx. USD 28 million);

ii. Pre-requisition for Migration: Existing AIF schemes may convert to a scheme of AI-Only Fund or LVF scheme with positive investor consent and by meeting specified conditions;

iii. Actions Post Receipt of Investor Consent: Post receipt of investor consent: (a) name of AIF to be amended to include ‘AI only fund’ or ‘LVF’ in the scheme name; (b) manager to report the change to SEBI through email to ‘aifreporting@sebi.gov.in’ and to depositories within 15 days of conversion; and (iii) trustee/ sponsor of the AIF to ensure that the compliance test report prepared by the manager includes compliance with the Circular; and

iv. Clarification in Relation to AI-Only Funds: It has been clarified that: (a) an investor who is an AI at on-boarding retains that status for the life of the scheme, regardless of any interim change in their status; (b) AI-Only Fund schemes are permitted a maximum tenure extension of five years, however, for existing AIFs that migrate to become AI-Only Funds, the period of five years to include any prior extensions already taken prior to migration; and (c) the Circular amends the Master Circular for AIFs dated May 7, 2024, to exempt LVFs from obtaining specific investor adopting the standard Private Placement Memorandum (‘PPM’) template and from the annual audit of PPM terms without needing specific investor waivers.

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