Chapter III · Investment Conditions and Restrictions
Regulation 15
General Investment Conditions
Chapter III · Investment Conditions and Restrictions
SEBI (Alternative Investment Funds) Regulations, 2012
In plain English
In plain English
Regulation 15 sets the conditions that apply across categories. The headline limit: a Category I or II fund cannot put more than 25% of its investable funds into one investee company, directly or through units of other AIFs.
What the Master Circular adds
From SEBI's Master Circular for AIFs (updated 16 June 2026). The Regulation sets the rule; the Master Circular sets how it works in practice.
- MC Ch 4
An AIF that will invest in units of other AIFs must disclose the proposed allocation to them in its PPM. Pooling vehicles cannot be set up only to invest in an AIF unless they are themselves registered as AIFs.
- MC Ch 4
Category I and II AIFs may buy credit default swaps on their debt investments only to hedge. This does not count as leverage, total exposure to the investee must stay within the concentration limit, and each CDS deal is reported to the custodian by the next working day.
- MC Ch 5
Overseas investment is allowed only in equity and equity-linked instruments of offshore venture capital undertakings, within an overall industry limit of USD 1,500 million shared by AIFs and VCFs. The investee must be in a country whose securities regulator has signed the IOSCO MMoU (or a bilateral MoU with SEBI), and not in a jurisdiction flagged by FATF. No joint ventures or wholly owned subsidiaries, and exits only to entities eligible to invest overseas under FEMA.
Where this sits
Regulation 15 is in Chapter III — Investment Conditions and Restrictions of the SEBI (Alternative Investment Funds) Regulations, 2012.
Key numbers
Provisos, explanations and conditions
Quoted from the regulation text. These qualify or carve out exceptions to the main rule.
Provided that for investment in listed equity of an Investee Company, Category III Alternative Investment Funds may calculate the investment limit of ten per cent of either the investable funds or the net asset value of the scheme and large value funds for accredited investors of Category III Alternative Investment Funds may calculate the investment limit of twenty per cent of either the investable funds or the net asset value of the scheme, subject to the conditions specified by the Board from time to time;] [(da) Alternative Investment Funds which are authorised under the fund documents to invest in units of Alternative Investment Funds shall not offer their units for subscription to other Alternative Investment Funds;] [(e) Alternative Investment Fund shall not invest except with the approval of seventy five percent of investors by value of their investment in the Alternative Investment Fund in (a) associates; or
Provided that while obtaining approval of the investors, the investor specified under sub-clause (c) who has committed to invest at least fifty percent of the corpus of the scheme of Alternative Investment Fund and is buying or selling the investment, from or to, the Alternative Investment Fund, shall be excluded from the voting process.] [(f) Un-invested portion of the investable funds and divestment proceeds pending distribution to investors may be invested in liquid mutual funds or bank deposits or other liquid assets of higher quality such as Treasury bills, Triparty Repo Dealing and Settlement, Commercial Papers, Certificates of Deposits, etc. till the deployment of funds as per the investment objective or the distribution of the funds to investors as per the terms of the fund documents, as applicable;]
Provided that the requirement under clause (i) of sub-regulation (1) shall not apply to:
What changed
No change to this regulation by the 2026 amendments (No. 303 of 16 April 2026 and No. 313 of 10 July 2026).
Words in square brackets in the official text mark earlier amendments made before 2026. Their earlier wording is not shown because it has not been verified here.
Where it connects
The text of this regulation does not refer to other numbered regulations.
Related Master Circular chapters (by subject)
- Chapter 4 · Investment instrument/security specific conditions for AIFs
- Chapter 5 · Guidelines for overseas investments by AIFs and related reporting
Chapter
Check yourself
9 practice questions on Regulation 15, each with an explanation for every option.
- How much of its investable funds may a Category I or II AIF invest in a single investee company?
- Overseas investment by AIFs is allowed in:
- True or false: an AIF may invest in a company incorporated in a jurisdiction flagged by FATF for strategic AML/CFT deficiencies.
- Why may a Category II AIF buy a credit default swap?
- Can an AIF invest in securities of companies incorporated outside India?
The regulation
15. (1) Investments by all categories of Alternative Investment Funds shall be subject to the following conditions:(a) Alternative Investment Fund may invest in securities of companies incorporated outside India subject to such conditions or guidelines that may be stipulated or issued by the Reserve Bank of India and the Board from time to time; (b)[***] [(c) Category I and II of Alternative Investment Funds shall invest not more than twenty five per cent of the investable funds in an Investee Company directly or through investment in the units of other Alternative Investment Funds[:] [Provided that large value funds for accredited investors of Category I and II may invest up to fifty percent of the investable funds in an investee company directly or through investment in the units of other Alternative Investment Funds;] [(d) Category III Alternative Investment Funds shall invest not more than ten per cent of the investable funds in an Investee Company, directly or through investment in units of other Alternative Investment Funds and the large value funds for accredited investors of Category III Alternative Investment Funds may invest up to twenty per cent of the investable funds in an Investee Company, directly or through investment in units of other Alternative Investment Funds:
Provided that for investment in listed equity of an Investee Company, Category III Alternative Investment Funds may calculate the investment limit of ten per cent of either the investable funds or the net asset value of the scheme and large value funds for accredited investors of Category III Alternative Investment Funds may calculate the investment limit of twenty per cent of either the investable funds or the net asset value of the scheme, subject to the conditions specified by the Board from time to time;] [(da) Alternative Investment Funds which are authorised under the fund documents to invest in units of Alternative Investment Funds shall not offer their units for subscription to other Alternative Investment Funds;] [(e) Alternative Investment Fund shall not invest except with the approval of seventy five percent of investors by value of their investment in the Alternative Investment Fund in (a) associates; or
(b) units of Alternative Investment Funds managed or sponsored by its Manager, Sponsor or associates of its Manager or Sponsor;] [(ea) Except with the approval of seventy five percent of the investors by value of their investment in the scheme of Alternative Investment Fund and subject to the Provided that large value funds for accredited investors of Category III may invest up to twenty percent of the investable funds in an investee company directly or through investment in units of other Alternative Investment Funds;” conditions specified by the Board, a scheme of an Alternative Investment Fund shall not buy or sell investments, from or to (a) associates; or
(b) schemes of Alternative Investment Funds managed or sponsored by its Manager, Sponsor or associates of its Manager or Sponsor; or
(c) an investor who has committed to invest at least fifty percent of the corpus of the scheme of Alternative Investment Fund:
Provided that while obtaining approval of the investors, the investor specified under sub-clause (c) who has committed to invest at least fifty percent of the corpus of the scheme of Alternative Investment Fund and is buying or selling the investment, from or to, the Alternative Investment Fund, shall be excluded from the voting process.] [(f) Un-invested portion of the investable funds and divestment proceeds pending distribution to investors may be invested in liquid mutual funds or bank deposits or other liquid assets of higher quality such as Treasury bills, Triparty Repo Dealing and Settlement, Commercial Papers, Certificates of Deposits, etc. till the deployment of funds as per the investment objective or the distribution of the funds to investors as per the terms of the fund documents, as applicable;]
(g) Alternative Investment Fund may act as Nominated Investor as specified in clause (b) of sub-regulation (1) of regulation 106N of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009; [(h) Investment by Category I and Category II Alternative Investment Funds in the shares of entities listed on institutional trading platform after the commencement of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2015 shall be deemed to be investment in ‘unlisted securities’ for the purpose of these regulations.] [(i) Alternative Investment Funds shall hold their investments in dematerialised form, subject to such conditions as may be specified by the Board from time to time:
Provided that the requirement under clause (i) of sub-regulation (1) shall not apply to:
(a) investments by Alternative Investment Funds in such type of instruments which are not eligible for dematerialisation,
(b) investments held by a liquidation scheme of the Alternative Investment Funds that are not available in the dematerialised form, and (c) such other investments by Alternative Investment Funds and such other schemes of Alternative Investment Funds as may be specified by the Board from time to time.]
(2) Notwithstanding the conditions as specified in sub-regulation (1), the Board may specify additional requirements or criteria for Alternative Investment Funds or for a specific category thereof.
Text from the consolidated Regulations. Square brackets and [***] mark earlier amendments and omissions, as in the official text. Check the official Gazette text before relying on it.
Last checked against source on 10 October 2026: consolidated Regulations to 19 November 2025, read with Amendment Regulations No. 303 (16 April 2026) and No. 313 (10 July 2026).
Source and verification
- Instrument
- SEBI (Alternative Investment Funds) Regulations, 2012 — Regulation 15
- Text used
- Consolidated Regulations as amended up to 19 November 2025, read with the 2026 amendments (no change to this regulation)
- Last checked
- 10 October 2026
- Official source
- www.sebi.gov.in → Legal → Regulations. The Gazette text prevails.
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