Can India’s investment funds shed their old legal skin to attract global money?

India’s Alternative Investment Funds have operated almost entirely as trusts since their regulatory birth in 2012. About 97% of all AIFs registered with SEBI still use this structure today, because trusts are fast to set up, light on compliance, and protect investor privacy by keeping beneficiary names out of public filings. But a growing chorus of fund managers is now questioning this default, and the Corporate Laws (Amendment) Bill, 2026 is giving that conversation a statutory shape by proposing a direct conversion route from trust to LLP.

The push toward the Limited Liability Partnership model is driven by three clear gaps in the trust structure. Trusts carry no statutory limited liability, which makes sophisticated global investors uncomfortable at diligence. They also rely on bespoke trust deeds rather than codified governance, and they look unfamiliar to offshore pension funds, sovereign wealth funds, and institutional LPs who are far more comfortable with Delaware-style limited partnerships or UK LLP structures. India’s AIF commitments have already crossed Rs 15.74 trillion as of December 2025, growing at nearly 20% annually, and the industry is projected to reach Rs 100 lakh crore by 2030, so structural inefficiency now costs real capital.

The proposed Bill inserts a new Section 57A in the LLP Act, 2008, enabling a “specified trust” registered with SEBI or IFSCA to convert into an LLP, with assets vesting automatically and contracts continuing without disruption. Three-fourths of investors must consent, and trustees remain personally liable for obligations predating the conversion, so the route is cleanest for funds with no legacy liabilities. One unresolved concern is whether the conversion will trigger capital gains tax, since no specific exemption like the one available for company-to-LLP conversions currently exists for trust-to-LLP transitions, and tax clarity is essential before any fund manager considers making the move.