Explain Categories of AIF.

As per the SEBI (Alternative Investment Funds) Regulations, 2012, SEBI has classified AIF into the following three broad categories: Category I: Fund that invest in start-up or early stage ventures or social ventures or Small and Medium Enterprises (SMEs) or infrastructure or other sectors which the government or regulators consider as socially or economically desirable which include VCF, SME Funds, Social Venture Funds (SVF), Infra Funds and such other AIFs as may be specified in the AIF Regulations. Category II: Funds that do not fall in Category I and III AIF and those that do not undertake leverage or borrowing other than to meet the permitted day to day operational requirement including Private Equity Funds or Debt Funds. Category III: Funds that employ diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives for e.g. Hedge Funds, SEBI has allowed the Category-III Alternative Investment Funds (AIFs) to participate in the commodity derivatives market also.