SEBI’s Accredited Investor Push: Will It Drive a Boom in Alternative Funds?
The alternative investment industry is currently divided on whether the Securities and Exchange Board of India’s (SEBI) recent rule changes will successfully expand India’s base of Accredited Investors (AIs)—sophisticated investors with the financial capacity and understanding for high-risk instruments.
Despite a robust Alternative Investment Fund (AIF) market, which has raised over ₹6.36 lakh crore by September 2025, the number of registered AIs remains low, currently at “below 1,000.”
The AI Framework and Recent Reforms
Who Qualifies as an AI?
SEBI defined an accredited investor in 2021 based on high financial thresholds:
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Individuals/Family Trusts: Annual income of at least ₹2 crore, or net worth of ₹7.5 crore with minimum financial assets of ₹3.75 crore.
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Corporate Bodies: Net worth of ₹50 crore.
The November 2025 Amendments
On November 19, 2025, SEBI notified key amendments intended to boost the AI segment:
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Exclusive Funds: AIFs can now launch funds or schemes where all investors must be accredited.
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Conversion: Existing AIFs are allowed to convert into accredited-only schemes.
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1,000 Investor Cap Removal: The statutory cap of 1,000 investors in an AIF will not apply to accredited investor-only funds, creating potential for economies of scale.
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Flexible Investment Minimum: The most significant benefit for AIs is the removal of the minimum investment limit (typically ₹1 crore for AIFs), allowing them to diversify their risks by allocating smaller amounts across various schemes.
Industry View: Why is Adoption Low?
Industry executives highlight two main challenges to the mass adoption of the AI framework:
1. Lack of Specialized Products
Ranjit Jha, managing director & chief executive officer of Rurash Financials, points out that AIs are currently “not offered a lot in India.”
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In developed markets like the US, AIs gain access to a wider menu of products like private equity and hedge funds, often involving leverage or complex derivatives.
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This specialized framework currently does not fully exist in India, where, outside of AIFs, there are no other dedicated products for accredited investors.
2. Conflict over Minimum Investment
While the removal of the ₹1 crore minimum investment is a benefit for AIs looking to diversify, it is a point of contention for some AIFs.
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An executive noted that the lack of a minimum investment limit has not “sat well with AIFs,” as it could affect the total inflows into a fund, which otherwise relies on the ₹1 crore minimum from general investors.
Optimism for the Future
Other industry leaders remain optimistic that the recent reforms will gain momentum:
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Awareness and Education: Rohit Gulati, CEO of UTI Alternatives, expects AI figures to pick up as awareness improves. Fund managers will be keen to launch accredited investor-only funds once a “critical mass” of AIs is achieved.
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Scale and Diversification: Asif Iqbal Khan, General Counsel at Vivriti Asset Management, suggests that the removal of the 1,000-investor cap combined with the flexible minimum investment limit will create scale efficiencies through technology-driven investor outreach. This allows AIs to take sophisticated, diversified bets with smaller ticket sizes.
The consensus is that while AIFs will eventually become accredited investor-only products, the transition requires greater cost-effectiveness, expanded benefits, and frictionless coordination among the regulator, the industry, and investors.
Explore Private Wealth
For a deeper understanding of the role of and the mechanics of, explore perspectives from Ranjit Jha (CEO)—known for research-driven, long-term financial analysis.
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