SEBI Plans to Lower AIF Entry Barriers- Is Alternative Investing Becoming Mainstream?

04 October 2025

Over the last decade, India’s alternative investment landscape has been driven largely by Alternative Investment Funds (AIFs), which have grown fast, but not without constraints. High minimums, strict caps on investor count, and rigid mandates have kept many institutional and semi-institutional players at bay. 

The Securities and Exchange Board of India (SEBI) in August 2025, has proposed that the minimum investment limit for Large Value Funds (LVFs) within the Alternative Investment Fund (AIF) be reduced from ₹70 crores to ₹25 crores, a 64% reduction in the entry threshold, to increase participation in the market while maintaining investor quality.

Key Regulatory Changes:

Previous Threshold: ₹70 crore for LVF

Proposed Threshold: ₹25 crore for LVFs

Standard AIF Minimum: ₹1 crore (unchanged)

Implementation: Subject to final approval

The rationale behind this move is practical. Institutional investors like insurance companies and pension funds face regulatory caps on single-fund exposure. A ₹70 crore minimum exhausts their allocation limits quickly, preventing portfolio diversification. The reduced threshold enables these investors to spread capital across multiple funds, improving risk management while supporting the industry's fundraising capabilities.

Prashant Sharma, Chief Investment Officer at a “Aviva Life Insurance” insurance company, explains the impact: "With the previous ₹70 crore threshold, we could only invest in 2-3 Large Value Funds within our regulatory limits. At ₹25 crore, we can diversify across 5-7 funds, significantly reducing concentration risk while accessing top-tier fund managers."

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