With reference to investments, consider the following:BondsHedge FundsStocksVenture CapitalHow many

Question

With reference to investments, consider the following:BondsHedge FundsStocksVenture CapitalHow many of the above are treated as Alternative Investment Funds?

Accepted Answer

In recent times, there is growing popularity of funds which pool-in resources from Ultra High- Networth Individual, or Institutional Investors and invest in Non- public Markets –i.e., markets for securities which are not listed on stock exchanges and invest in instruments which are of complex nature and hence carry high risk. Such funds are collectively called Alternative Investment Funds (AIFs). Alternative Investment Funds play an important role in the financial market by providing investment opportunities to investors who are seeking higher returns or diversification beyond traditional investment options such as stocks and bonds. SEBI (Alternative Investment Funds) Regulations, 2012 provide a legal framework for the pooled investment funds in India such as venture capital, real estate, private equity, hedge funds etc., other than Mutual Funds. Category I AIF: AIF which invests in start-up or early- stage ventures or social ventures or SMEs or Infrastructure or Distressed assets. Ex: Venture Capital Funds, SME Funds, Social Venture Funds Infrastructure Funds, Special Situations Funds etc. Category II AIF: AIF which does not fall in category I &III, and which does not undertake leverage other than to meet day-to-day operations as permitted by SEBI Regulations. Ex: Private Equity Fund Category III AIF: AIF which employs diverse / complex trading strategies and may employ leverage through investment in listed or unlisted derivatives. Ex: Hedge Funds. Hence option (b) is the correct answer.