NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Collective Investment Vehicles
A Category III Alternative Investment Fund (AIF) is best described as one that:
A Category III AIF uses diverse or complex trading strategies and may employ leverage, including investing in derivatives. Start-up, infrastructure and social venture funds belong to Category I, and Category III funds are not barred from derivatives.
- AEmploys diverse or complex trading strategies and may use leverage, including investments in listed or unlisted derivativesCorrect
- BInvests only in start-ups and receives government incentives
- CInvests in infrastructure projects and social ventures only
- DCannot use any leverage or derivatives under any circumstances
Explanation
Under SEBI AIF Regulations, Category III funds, such as hedge funds, use diverse or complex strategies and may employ leverage or trade derivatives. Start-up and social venture funds fall under Category I, and Category III is not prohibited from using derivatives.
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