Context:
The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing major reforms to Large Value Funds (LVFs) under the Alternative Investment Fund (AIF) framework to widen participation and ease compliance. Public comments are open until 29 August 2025.
What Are Large Value Funds (LVFs)?
Large Value Funds are a special category of Alternative Investment Funds (AIFs) in India where the minimum investment per investor is ₹70 crore. They are designed for sophisticated and ultra-high-net-worth investors who can commit substantial capital.
Key Features
- Minimum Investment Ticket Size: ₹70 crore per investor.
- Lower Diversification Norms: LVFs can invest more capital in a single investee company compared to standard AIFs.
- Reduced Regulatory Overhead: Fewer restrictions on investment limits and related-party transactions.
- Eligible Investors: Typically institutions, large family offices, sovereign wealth funds, and ultra-HNIs.
Key SEBI Proposals:
- Lower Entry Threshold
- Minimum investment cut from ₹70 crore → ₹25 crore per investor.
- Rationale: ₹70 crore was too high for many domestic institutions; ₹25 crore keeps sophistication but broadens access.
- Scrapping Certain Compliance Rules
- No need to follow SEBI’s standard Private Placement Memorandum (PPM) template.
- No NISM certification needed for managers’ key investment teams (if running only LVFs).
- Removing Investor Cap
- Current 1,000-investor limit for AIF schemes removed for LVFs.
- Justification: High ticket size & accredited status are already safeguards.
- Conversion Option
- Existing AIFs can convert into LVFs if all investors meet criteria and give unanimous consent.
- Categorical Exemptions
- Automatic relief from certain disclosure & audit requirements — no need for individual waivers.
- Accredited investors already sign risk acknowledgments.
- Committee Member Liability Relief
- Investment committee members in LVFs not personally responsible for compliance; accountability remains with fund & managers.
Private Placement Memorandum (PPM): A detailed disclosure document outlining a fund’s strategy, risks, fees, and governance, usually in SEBI’s standard format.
NISM Certification: A professional credential validating the investment team’s market knowledge and compliance expertise.
