SEBI Clarifies Broad-Based Fund Rules for AIFs Managed by AMCs
- 13th April 2026
- 12:00 AM
- 3 min read
Summary
SEBI issued informal guidance on 9 April clarifying that alternative investment funds managed or advised by asset management companies must comply with broad-based fund requirements. These include a minimum of 20 investors and a 25% single-investor ownership cap, assessed at the individual scheme level. The guidance, issued in response to a query from UTI Alternatives Pvt Ltd, is not a binding Board decision.India’s market regulator has extended the applicability of broad-based fund requirements to alternative investment funds managed or advised by asset management companies and their subsidiaries. The Securities and Exchange Board of India issued informal guidance on 9 April 2026 in response to a query submitted by UTI Alternatives Pvt Ltd, confirming that AIFs qualify as pooled assets under the regulatory framework.
The clarification brings these vehicles within the same investor composition standards that apply to mutual funds, with direct implications for AMCs operating in the AIF space.
What Are the Broad-Based Fund Criteria for AMC-Managed AIFs?
SEBI confirmed that any AIF (Alternative Investment Fund) managed or advised by an AMC or its subsidiary must meet two core conditions to qualify as a broad-based fund. The fund must have a minimum of 20 investors, and no single investor may hold more than 25% of the total corpus.
These thresholds mirror the standards already in place for mutual funds under SEBI’s existing framework. The regulator’s guidance extends these conditions to pooled AIF vehicles where an AMC or subsidiary plays a management or advisory role.
Why Must Compliance Be Assessed at the Scheme Level?
SEBI specified that the broad-based criteria must be evaluated at the level of individual AIF schemes, not at the overall fund level. This aligns with the existing treatment of AIF schemes under AIF regulations, where each scheme is already considered a distinct investment vehicle for investor limits, corpus requirements, and compliance obligations.
SEBI’s informal guidance letter stated that “the broad-based requirement shall be assessed at the scheme level, as it reflects the actual investor composition of the pooled vehicle to which management/advisory services are rendered by the AMC or its subsidiaries.”
How Does the Guidance Apply to Master-Feeder Fund Structures?
For fund structures involving a master fund and one or more feeder funds, SEBI confirmed that each entity must independently meet the broad-based requirement. This applies even where investment decisions are made centrally at the master fund level.
No blanket exemption is available for feeder structures. Every vehicle within such an arrangement is assessed on its own investor composition, regardless of where portfolio management occurs.
Which Entities Are Excluded from FPI Exemptions?
Certain relaxations available to specified categories of foreign portfolio investors under mutual fund regulations do not extend to domestic regulated entities. SEBI confirmed that banks, insurance companies, and provident fund trusts, which operate under separate domestic regulatory frameworks, are not eligible for these exemptions.
Future Outlook
SEBI noted that the guidance is based on the specific facts presented in UTI Alternatives’ query and represents the department’s interpretative position. The regulator confirmed it does not constitute a binding Board decision and may differ in application where facts vary. AMCs and AIF managers will need to review their scheme-level investor composition against the broad-based criteria in light of this clarification.
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