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?

(a) Only one
(b) Only two ✓ UPSC's answer
(c) Only three
(d) All the four

Why the answer is (b)

• Under SEBI's Alternative Investment Funds Regulations, 2012, an AIF is a privately pooled vehicle investing outside the conventional routes of listed stocks, bonds and mutual funds.

• Venture capital funds fall in Category I AIFs (along with social venture, SME and infrastructure funds) — item IV qualifies.

• Hedge funds, which use leverage and complex trading strategies, fall in Category III AIFs — item II qualifies.

• Bonds and stocks are ordinary, publicly traded securities; they are what conventional funds buy, not alternative investment funds themselves — items I and III do not qualify.

• Hence two of the four, option (b). (Category II covers private equity and debt funds.)

Why the other options are wrong

(a) Only one: Both hedge funds and venture capital are AIF categories, so the count is two.
(c) Only three: Bonds and stocks are ordinary securities, not AIFs; only two items qualify.
(d) All the four: Bonds and stocks are not alternative investment funds.

Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2025, held on 25 May 2025. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.