UPSC Prelims 2025 · Question 31 of 100
UPSC Prelims 2025 question on Alternative Investments
- ExamUPSC CSE
- Year2025
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicSecurity Market in India
- DifficultyMedium
- TypeStatement
With reference to investments, consider the following:
I. Bonds
II. Hedge Funds
III. Stocks
IV. Venture Capital
How many of the above are treated as Alternative Investment Funds?
Show answer
Answer: B. Only two
Alternative Investment Funds (AIFs) are funds that pool resources from Ultra High-Net-Worth Individuals or Institutional Investors and invest in Non-public Markets — markets for securities not listed on stock exchanges — investing in instruments of complex nature and high risk.
I. Bonds – INCORRECT: Bonds are traditional investment instruments listed and traded on exchanges. Not an AIF.
II. Hedge Funds – CORRECT: Hedge Funds fall under Category III AIF — AIF which employs diverse/complex trading strategies and may employ leverage through investment in listed or unlisted derivatives.
III. Stocks – INCORRECT: Stocks are traditional instruments listed on stock exchanges. Not an AIF.
IV. Venture Capital – CORRECT: Venture Capital Funds fall under Category I AIF — AIF which invests in start-up or early-stage ventures, SMEs, or Infrastructure/Distressed assets.
Only two (Hedge Funds and Venture Capital) are treated as Alternative Investment Funds → Option (b).