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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Overview of Alternative Investment Funds (AIFs)

Ms. Anita Rao, aged 38, holds units of a close-ended Category II AIF. Which statement about the tenure and liquidity of such an AIF is correct?

Category I and II AIFs must be close-ended with a minimum tenure of three years. They do not offer daily redemption at NAV, so investors should plan for long-term illiquidity rather than expect on-demand exits.

  1. AUnits can be redeemed on any business day at NAV
  2. BCategory I and II AIFs must be close-ended with a minimum tenure of three yearsCorrect
  3. CThe tenure must be at least one year
  4. DUnits cannot be transferred under any circumstances

Explanation

Category I and II AIFs must be close-ended with a minimum tenure of three years. Redemption on demand is not available in close-ended funds, one year is not the minimum tenure, and units may be transferred or dematerialised subject to the regulations.

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