Between September and December 2025, SEBI introduced three new structures into the AIF rulebook: the Accredited Investor Only Fund (AIOF), the Co-Investment Vehicle (CIV), and a revised Large Value Fund (LVF) with a lower minimum ticket.
At Steptrade Capital – India’s first SME-exchange-focused Category II AIF with ₹400 crore-plus AUM – these are live structuring options, not abstract footnotes. This blog breaks down each one: what it permits, who it is for, and what it means.
Key Takeaways
- AIOF: All investors (except sponsors and managers) must be SEBI-accredited. Exempt from pari-passu norms, NISM certification, and the 1,000-investor cap. See SEBI circular, December 8, 2025.
- CIV: Category I and II AIFs can launch dedicated co-investment schemes for accredited participants in a single investee company. See SEBI circular, September 9, 2025.
- LVF: Minimum investment cut from ₹70 crore to ₹25 crore. Exempt from standard PPM template, annual PPM audit, and the 1,000-investor cap.
- Accreditation locks in at onboarding – no periodic re-accreditation required for the full scheme life.
- Migration requires 100% investor consent. SEBI and depositories must be notified within 15 days of conversion.
- AIF Industry Scale: ₹15.74 lakh crore in commitments and ₹6.45 lakh crore in investments (December 2025) – the scale these new structures now govern.
- SEBI Risk Reminder: All AIF investments carry market risk, illiquidity risk, and regulatory risk. Past performance does not guarantee future results.
Why SEBI Introduced These Structures
India’s AIF industry has scaled to over 1,700 registered funds and ₹15.74 lakh crore in commitments. Much of that capital now comes from family offices and UHNIs capable of making fully independent investment decisions.
SEBI’s logic is clear: the more sophisticated the investor, the lighter the regulation needs to be. Accreditation becomes a gatekeeping mechanism. Once someone passes that bar, compliance obligations relax in proportion.
For managers, the relief is real: differential side letter terms become possible, NISM barriers fall away, and PPM templates become flexible. The Compliance Test Report keeps SEBI’s oversight intact without prescriptive rules at every step.
AIOF – The Accredited Investor Only Fund
The AIOF was introduced through the SEBI AIF Third Amendment Regulations (November 18, 2025). Every investor – except the sponsor, manager, and their employees or directors – must be SEBI-recognized as an accredited investor.
The pari-passu requirement under Regulation 20(22) no longer applies. Fund managers can offer differential rights through side letters without breaching equal-treatment obligations – provided those rights are not detrimental to other investors.
Additionally, the NISM Series-XIX-C certification requirement for key team members does not apply, and the 1,000-investor cap is lifted. Trustee duties can be performed by the fund manager directly, streamlining governance.
The maximum tenure extension is five years, counting any prior extensions. Every AIOF scheme must append “AI only fund” to its name, and compliance must be covered in the Compliance Test Report.
For Steptrade, the AIOF framework fits its high-conviction approach. Offering bespoke terms via side letters – without the pari-passu constraint – is exactly how institutional private market investing works at scale.
CIV – The Co-Investment Vehicle
Before September 2025, the only regulated co-investment route for AIFs was the Co-PMS structure – requiring a separate PMS registration and significant operational overhead. The CIV framework (September 9, 2025) eliminates that friction entirely.
Category I and II AIFs can now launch dedicated co-investment schemes within their existing AIF structure. This lets accredited participants co-invest alongside the main fund in a specific investee company – without a separate PMS registration.
Each CIV is a single company: one scheme per investee, investing only in unlisted securities of that company. No leverage, no investment in other AIF units, and no March quarter QAR. Assets are ring-fenced in separate bank and demat accounts.
Co-investment terms cannot be more favorable than those of the main fund. Pricing, valuation, and exit timing must mirror the fund’s own position. The CIV winds up when the main AIF exits that investment.
An investor’s total CIV exposure to one company is capped at three times their main AIF commitment. Sovereign wealth funds, DFIs, and multilateral institutions are exempt. CIVs are also exempt from the ₹20 crore minimum corpus and PPM filing.
For Steptrade’s Category II fund – which backs unlisted and pre-listing SME companies – the CIV structure opens a SEBI-regulated path for accredited participants to increase targeted exposure to specific high-conviction portfolio names alongside the fund.
LVF – The Large Value Fund, Now More Accessible
The LVF existed before these reforms, but the December 8, 2025 circular changed its economics. The minimum investment per accredited investor was cut from ₹70 crore to ₹25 crore – opening participation to a wider set of institutional players.
The ₹70 crore threshold had kept smaller family offices and insurance arms out despite their sophistication. The revised ₹25 crore threshold brings the LVF within reach of a meaningfully broader institutional cohort.
LVFs are exempt from the standard SEBI PPM template and annual PPM audit, with no investor waivers required. The 1,000-investor cap does not apply. Category I and II LVFs can concentrate up to 50% of investable funds in one company.
Since all LVFs qualify as AI-only schemes, they carry every AIOF-level exemption plus the LVF-specific concentration and PPM relaxations. All LVF scheme names must carry “LVF” as a suffix.
Migration: How Existing AIFs Can Convert
The December 2025 framework also creates a path for existing AIF schemes to convert into AIOF or LVF structures. The consent bar is absolute: every existing investor must provide affirmative written consent. One holdout blocks the conversion.
Once consent is obtained, the scheme name must be updated (appending on “AI only fund” or “LVF”). SEBI and depositories must both be notified within 15 days to update scheme records across market infrastructure.
The Compliance Test Report must expressly confirm adherence to migration rules, investor eligibility, and any operational relaxations claimed. This is how SEBI tracks ongoing compliance without requiring intrusive inspections.
What to Think Through Before Committing Capital
All three structures are restricted to accredited investors. Those without a valid SEBI accreditation certificate should verify eligibility first. Accreditation is determined at onboarding and held for the scheme’s full life.
Lighter regulation in AIOFs and LVFs shifts investor protection from prescribed formats to the quality of fund documents and side letters. That demands more rigorous independent due diligence before any commitment – not less.
CIVs carry concentration risk by design – all capital is exposed to one company. All AIF investments carry market risk, illiquidity risk, and regulatory risk. Independent financial and legal advice is strongly recommended before committing.
Conclusion
SEBI’s AIOF, CIV, and revised LVF represent the most significant expansion of India’s AIF toolkit in years. The common thread: greater flexibility goes only to structures where every participant can make truly independent decisions.
For HNIs, family offices, and institutional allocators already active in AIFs, these structures open more precise deployment paths – bespoke terms via AIOFs, structured co-investment via CIVs, and large-value access at a lower threshold via LVFs.
Steptrade Capital operates SEBI-regulated AIF structures built for exactly this standard – research-first in investment, disciplined in compliance. With ₹400 crore-plus AUM and 100-plus SME investments, Steptrade brings institutional rigour to every structure it runs. Visit steptrade.capital to learn more.
Frequently Asked Questions
1. What is an Accredited Investor Only Fund (AIOF)?
An AIOF is a fund where every investor (except the sponsor, manager, and their employees) must be SEBI-recognized as an accredited investor. AIOFs are exempt from pari-passu norms, NISM certification requirements for key team members, and the 1,000-investor cap.
2. What is a Co-Investment Vehicle (CIV)?
A CIV lets Category I and II AIFs launch a dedicated co-investment scheme for accredited participants to invest in one specific unlisted company alongside the main fund. Each CIV is a single-company, no-leverage, and co-terminus with the main AIF.
3. What changed for Large Value Funds in December 2025?
The minimum investment was reduced from ₹70 crore to ₹25 crore per accredited investor. LVFs are also exempt from the standard PPM template, annual PPM audit, and the 1,000-investor cap. Category I and II LVFs can concentrate up to 50% of investable funds in one company.
4. Who qualifies as an accredited investor?
SEBI defines accreditation through net worth, income, and financial sophistication criteria, verified through SEBI-approved agencies. Once accredited at onboarding, that status holds for the full scheme life – no re-accreditation is required.
5. Can an existing AIF convert into an AIOF or LVF?
Yes, but only with 100% affirmative consent from every existing investor. Once obtained, the scheme name must be updated, SEBI must be notified within 15 days, and depositories must be informed to update scheme records.
6. What is the co-investment exposure cap in a CIV?
An investor’s total CIV exposure to one company is capped at three times their main AIF commitment. Sovereign wealth funds, development of financial institutions, and multilateral institutions are exempt from this cap.
7. What is the minimum investment in an AIOF or LVF?
AIOFs carry the standard SEBI minimum of ₹1 crore per investor per scheme. LVFs require a minimum of ₹25 crore per accredited investor under the December 2025 revised framework, reduced from the earlier ₹70 crore threshold.
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