recent times, there is growing popularity of funds pool-in resources from Ultra High- Networth or Institutional Investors and invest in Non- Markets –i.e., markets for securities which are listed on stock exchanges and invest in instruments are of complex nature and hence carry high risk. funds are collectively called Alternative Investment (AIFs). Alternative Investment Funds play an role in the financial market by providing opportunities to investors who are seeking returns or diversification beyond traditional options such as stocks and bonds. (Alternative Investment Funds) Regulations, 2012 a legal framework for the pooled investment in India such as venture capital, real estate, equity, hedge funds etc., other than Mutual I AIF: AIF which invests in start-up or early- ventures or social ventures or SMEs or or Distressed assets. Ex: Venture Capital SME Funds, Social Venture Funds Infrastructure Special Situations Funds etc. II AIF: AIF which does not fall in category I &III, which does not undertake leverage other than to day-to-day operations as permitted by SEBI Ex: Private Equity Fund III AIF: AIF which employs diverse / complex strategies and may employ leverage through in listed or unlisted derivatives. Ex: Hedge option (b) is the correct answer.