What are Category III AIF?

As per SEBI Regulations Category III AIF are AIFs which employs diverse or complex trading strategies and may employ leverage including through investment in listed or unlisted derivatives. AIF such as hedge funds or funds which trade with a view to make short term returns or such other funds which are open ended and for which no specific incentives or concessions are given by the government or any other Regulator shall be included. Therefore, funds under Category III are the most complex, and uses a diversified trading strategy in order to get high returns in short time.

Source: SEBI

General Conditions for Category III AIFs

• Category III AIF may invest in securities of listed or unlisted investee companies, derivatives, units of other AIFs, or complex or structured productsMay buy or sell credit default swaps
• May buy or sell credit default swaps
• May engage in leverage or borrow subject to consent from the investors in the fund and subject to a maximum limit as specified by the board
• Regulated through the issuance of directions

Category III AIFs include

• Hedge Fund
• Private Investment in Public Equity Fund (PIPE)
• Long Short Funds
• Long only Funds