✅Category Cat 1, Cat 2, and Cat 3 AIFs (Alternative Investment Funds) as defined by SEBI (Securities and Exchange Board of India):

???? Category I AIF
Purpose: Invest in socially or economically desirable sectors.

✔Includes:

Venture Capital Funds

Angel Funds

SME Funds

Infrastructure Funds

Social Venture Funds

✔ Benefits:

Eligible for tax benefits

Encouraged by the government due to their role in promoting innovation and development

✔ Investment Strategy: Long-term and developmental in nature

???? Category II AIF
Purpose: Invest in private equity, debt, and other non-leveraged strategies

✔Includes:

Private Equity Funds

Debt Funds

Fund of Funds (that don’t invest in Cat I or III AIFs)

✔ Features:

No specific incentives or concessions from the government

Cannot undertake leverage (except for day-to-day operations)

✔ Investment Strategy: Medium to long-term, focused on capital appreciation or regular income

???? Category III AIF
Purpose: Generate short-term returns using complex trading strategies

✔ Includes:

Hedge Funds

PIPE Funds (Private Investment in Public Equity)

✔ Features:

Can use leverage and derivatives

High-risk, high-return profile

✔Investment Strategy: Short-term capital gains, arbitrage, derivative trading, etc.

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