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

Which one of the following AIFs is classified as a Category II AIF under the SEBI AIF Regulations?

A private equity fund that does not borrow except to meet day-to-day operational needs is a Category II AIF. Venture capital and SME funds are Category I, and hedge funds using leverage and complex strategies are Category III.

  1. AVenture capital fund investing in start-ups
  2. BPrivate equity fund that does not use leverage other than to meet day-to-day operational needsCorrect
  3. CHedge fund employing complex trading strategies and leverage
  4. DSME fund

Explanation

Category II covers funds such as private equity and debt funds that do not undertake leverage other than for day-to-day operations within permitted limits. Venture capital and SME funds fall under Category I, while hedge funds using complex strategies and leverage fall under Category III.

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