Alternative Investment Funds · intermediate

AIF Categories — A Closer Look

Category I, II and III AIFs in more detail: which funds belong where, the rules on borrowing, leverage and concentration, and what sets Category III apart.

3 lessonsFact-checked 8 October 2026
  1. 01Category I — Venture, Angel, SME, Social Impact, Infrastructure and Special Situation FundsCategory I covers six kinds of AIF: venture capital, angel, SME, social impact, infrastructure and special situation funds. This lesson explains how the Regulations describe the category, what changed in 2022, the special rules for angel funds, and the other limits and the risks of the category.
  2. 02Category II — Private Equity, Private Credit and Real Estate FundsCategory II is the residual AIF category: private equity, private credit and real estate funds are the usual examples. This lesson covers what falls in it, why a REIT does not, and the limits on concentration and borrowing that apply.
  3. 03Category III — Complex Trading Strategies and LeverageCategory III AIFs use diverse or complex trading strategies and may use leverage, within a cap set by SEBI. This lesson covers the leverage cap, how these funds may be structured, their concentration and sponsor-interest rules, how they are taxed, and how they differ from a Specialized Investment Fund.

Free learning from the Trustner Group. Trustner Academy is an education initiative of the Trustner Group, whose companies work across insurance broking and investment services, with offices in Bangalore, Guwahati, Kolkata, Hyderabad and Mumbai. Everything here is for learning only — it is not advice, a recommendation or an offer of any product. Scenarios are illustrative. Rules and figures change; check the current regulation, scheme document or policy wording before acting on anything.