SEBI, vide its circular dated September 9, 2025, has issued a framework for co-investment within the AIF structure by allowing Category I and II AIFs to launch separate Co-Investment Schemes (CIV schemes) for accredited investors, in addition to the PMS route. Key provisions include: filing of a shelf placement memorandum, maintaining separate bank/demat accounts with ring-fenced assets, a co-investment cap (not exceeding 3x the investor’s contribution in the AIF scheme, with exemptions for DFIs, government entities, and sovereign funds), prohibition of co-investment by excused/excluded/defaulting investors, and restrictions to prevent indirect or impermissible exposures. CIV schemes cannot borrow or leverage, and investors’ rights and expenses will be proportionate to their contributions. Compliance standards will be overseen by the Standard Setting Forum of AIFs in consultation with SEBI, and trustees/sponsors must ensure reporting in the Compliance Test Report. The circular is applicable with immediate effect.
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