Alternative Investment Funds (AIFs), including private equity and hedge funds, have faced new regulatory scrutiny from the Securities and Exchange Board of India (Sebi). A circular dated October 8 mandates stricter due diligence for AIFs and their investors, particularly targeting high net worth individuals and institutional investors. The regulations aim to prevent the circumvention of rules by RBI-regulated lenders, especially concerning stressed loans. AIFs must ensure compliance when a significant portion of their corpus comes from these investors, and additional transparency is required for foreign investments. Experts warn that these compliance burdens could deter some investors.