Accredited Investors only (AI-only) Fund

Most AIF rules exist to protect investors who may not be able to judge the risk for themselves.

An AI-only Fund starts from the opposite assumption. Every investor in it is an accredited investor. Each one has already proved income or net worth to an accreditation agency.

So SEBI relaxes some of the protection. The scheme can launch faster. It does not need a merchant banker to file its offer document. It can run for longer. In return the investor gets fewer of the safeguards a normal scheme carries.

The class is new. SEBI brought it in through the AIF (Third Amendment) Regulations, 2025, with effect from 19 November 2025.

A large value fund for accredited investors is one type of AI-only Fund. Every LVF is an AI-only Fund. Not every AI-only Fund is an LVF.

The definition (Chapter 14, section 14.4.4). An AI-only Fund means an AIF, or a scheme of an AIF, in which each investor other than the Manager, Sponsor, employees or directors of the AIF and employees or directors of the Manager is an Accredited Investor. The workbook then adds the sentence that settles the family: AI-only Funds shall include LVFs for Accredited Investors. An LVF needs each such investor to be accredited and to invest not less than INR 25 crore. An AI-only Fund needs only the accreditation.

The name. Any new scheme launched as an AI-only scheme must add AI-only Fund or AIOF at the end of the scheme name. An LVF adds LVF.

Launch and filing (Chapter 8, section 8.5.1).

Tenure (section 14.5.2). A Category I or II scheme has a minimum tenure of 3 years, computed from the declaration of first close. An ordinary close-ended scheme may extend by up to 2 years with the approval of two-thirds of unit holders by value. An AI-only Fund may extend by up to 5 years on the same two-thirds approval, failing which it liquidates and winds up under the regulations. For a converted AI-only Fund or LVF, the 5 years includes any extension taken before conversion.

First close (section 14.5.1). The 12-month clock is unchanged: first close must be declared within 12 months from the date the AIF becomes eligible to launch its scheme, and at that date the corpus must be at least the INR 20 crore minimum.

Certification (section 14.1.2). A Manager normally needs key personnel holding the NISM AIF certification, refreshed on expiry. The workbook records that this provision is not applicable for AI-only Funds.

Pari-passu rights (section 14.10.1). The rule that investors in an AIF scheme hold pari passu rights does not apply to Accredited Investors only Funds.

The trustee work moves to the Manager. For an AI-only Fund the responsibilities and obligations of a trustee of an AIF specified under the AIF Regulations shall be carried out by the Manager of the AI-only Fund.

Once an AI, always an AI. An investor who is an accredited investor at the time of onboarding into a scheme is treated as one throughout the life of the scheme, even if the status is lost in between. And an accredited investor in an LVF, or in any Category I or II AIF launched exclusively for accredited investors where regulatory concessions have been availed, has no facility to withdraw consent to the accreditation framework.

Converting an existing fund. SEBI has laid down modalities for converting an existing AIF or scheme into an AI-only Fund or LVF, subject to positive consent from all the investors and meeting the conditions. After conversion the Manager must put AI-only Fund or LVF in the scheme name, report the conversion and the name change to SEBI within 15 days, and report the name change to the depositories within 15 days so their systems can be updated.

Illustrative fund, investors and dates. Every rule and figure applied to them is the workbook's.

Sahyadri Growth Fund — Scheme III (AIOF) is a Category II AIF scheme registered on 1 April 2026.

Every investor other than the Manager is accredited, so the scheme is an AI-only Fund and carries AIOF at the end of its name. Two things follow for Ms Deshpande. The INR 1 crore minimum investment does not apply to her at all, because accreditation disapplies it. And she is excluded when the 1,000-investor cap for the scheme is computed.

It is not an LVF, because two of the three investors have committed less than Rs 25 crore.

The tenure arithmetic. First close is declared on 1 October 2026, inside the 12 months allowed, with a corpus of Rs 94 crore — above the INR 20 crore floor. The stated tenure is 6 years, so the scheme runs to 1 October 2032. As an AI-only Fund it may be extended by up to 5 years, to 1 October 2037, with two-thirds approval by value. An ordinary Category II scheme could have gone only 2 years, to 1 October 2034.

The conversion catch. Suppose instead the scheme had launched as a regular Category II scheme, taken a 1-year extension in 2032, and converted to an AI-only Fund only in 2033. The 5-year window includes that year already used, so 4 years would remain, not 5.

What the investors give up. Ms Deshpande cannot later withdraw her consent to the accreditation framework, because this scheme was launched exclusively for accredited investors and has availed the concessions. And if she stops meeting the income and net-worth tests in 2029, she is still an accredited investor for the life of this scheme.

Chapter 14, section 14.4.4 (Large Value Fund for Accredited Investors and Accredited Investors only Fund) is the home section: the definition, the naming rule, the conversion modalities and the trustee substitution. The withdrawal-of-consent rules immediately before it in section 14.4 carry the AI-only carve-out, section 14.5.1 the launch timelines, and section 14.5.2 the 5-year extension. Outside Chapter 14, section 14.1.2 disapplies the certification requirement, section 14.10.1 disapplies pari-passu rights, and Chapter 8 section 8.5.1 sets the filing and launch modalities.

This is new material, effective 19 November 2025, which makes it prime question territory. Expect: what makes a scheme an AI-only Fund, what must be added to the scheme name (AI-only Fund or AIOF), who performs the trustee obligations (the Manager), the maximum tenure extension (5 years against 2), and the post-conversion reporting window (15 days, to SEBI and to the depositories).

• AI-only Fund is the family; the LVF is a member of it. The workbook says AI-only Funds shall include LVFs for accredited investors. So every LVF is an AI-only Fund, but an AI-only Fund is not automatically an LVF — the LVF also needs each investor to commit at least INR 25 crore.
• INR 25 crore and INR 70 crore are different tests, and neither defines an AI-only Fund. INR 25 crore is the LVF definition in section 14.4.4. INR 70 crore (USD 10 million or equivalent in non-INR currency) plus a waiver furnished by the investor is a separate category: section 8.5.3 exempts it from the SEBI-prescribed PPM template and the annual PPM audit, and section 10.5.3 disapplies the Investment Committee members-are-responsible provision for it.
• The PPM audit exemption is not given to AI-only Funds as a class. Section 8.5.3 names Angel Funds (but those with total investments at cost above INR 100 crore must audit from FY 2025-26), the INR 70 crore waiver category, and Large Value Funds — the last without needing a specific waiver. AI-only Funds are not named there. Do not assume the exemption travels to every AI-only Fund.
• Five years in total, not five more. For a converted fund the 5-year extension includes any extension taken before conversion.
• Conversion needs positive consent from all the investors, not a two-thirds majority. Two-thirds by value is the threshold for a tenure extension, which is a different decision.
• The Manager takes over the trustee obligations; the obligations do not disappear.
• The exemptions are from filing and process, not from the corpus and tenure floors. The scheme still needs INR 20 crore of corpus at first close, a minimum 3-year tenure, and first close within 12 months.
• AIOF is the abbreviation the workbook allows in the scheme name, alongside the full words AI-only Fund.