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      Question

      Which category of AIF is permitted to use leverage,

      including through borrowing, for investment purposes as per SEBI regulations?
      A Category I AIF Correct Answer Incorrect Answer
      B Category II AIF Correct Answer Incorrect Answer
      C Category III AIF Correct Answer Incorrect Answer
      D Angel Fund Correct Answer Incorrect Answer
      E InVITs Correct Answer Incorrect Answer

      Solution

      Category III AIFs (such as hedge funds) are allowed to employ leverage and complex trading strategies to generate short-term returns.
      In contrast, Category I and II AIFs are generally restricted from using leverage, except for limited short-term funding requirements.

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