With reference to lsquo National Investment and Infrastructure Fund rsquo which of the following sta...........

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With reference to ‘National Investment and Infrastructure Fund’, which of the following statements is/are correct?

1. It is an organ of NITI Aayog.

2. It has a corpus of Rs. 4, 00,000 crore at present.

Select the correct answer using the code given below:

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

Justification: NIIF has been structured as a fund of funds and set up as Category II Alternate Investment Fund (AIF) under the Securities and Exchange Board of India (SEBI) Regulations. Total corpus of the fund is Rs. 40000 Crore.

Anything alternate to traditional form of investments gets categorized as alternative investments. Now, what is considered as traditional may vary from country to country. Generally, investments in stocks or bonds or fixed deposits or real estates are considered as traditional investments. However, even with respect to investments in stocks, if the investments are in the stocks of small and medium scale enterprises (SMEs), it gets categorized as alternative investments in many jurisdictions .

hus, the definition of AIFs includes venture Capital Fund, hedge funds, private equity funds, commodity funds, Debt Funds, infrastructure funds, etc.,while, it excludes Mutual funds or collective investment Schemes, family trusts, Employee Stock Option / purchase Schemes, employee welfare trusts or gratuity trusts, ‘holding companies’ within the meaning of Section 4 of the Companies Act, 1956, securitization trusts regulated under a specific regulatory framework,and funds managed by securitization company or reconstruction company which is registered with the RBI under Section 3 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

Types of AIFs

AIFs are categorized into the following three categories, based on their impact on the economy and the regulatory regime intended for them:

Category I AIF are those AIFs with positive spillover effects on the economy, for which certain incentives or concessions might be considered by SEBI or Government of India; Such funds generally invests in start-ups or early stage ventures or social ventures or SMEs or infrastructure or other sectors or areas which the government or regulators consider as socially or economically desirable. They cannot engage in any leverage except for meeting temporary funding requirements for not more than thirty days, on not more than four occasions in a year and not more than ten percent of the corpus.eg. Venture Capital Funds, SME Funds, Social Venture Funds and Infrastructure Funds. Giving effect to the announcement by Union Finance Minister on angel investor pools in the Union Budget 2013-14, SEBI in June 2013 has approved a framework for registration and regulation of angel pools under a sub- category called 'Angel Funds' under Category I- Venture Capital Funds.

Category II AIF are those AIFs for which no specific incentives or concessions are given. Theydo not undertake leverage or borrowing other than to meet the permitted day to day operational requirements, as is specified for Category I AIFs. eg. Private Equity or debt fund.

Category III AIF are funds that are considered to have some potential negative externalities in certain situations and which undertake leverage to a great extent; These funds trade with a view to make short term returns. These funds are allowed to invest in CateogyI and II AIFsalso. They receive no specific incentives or concessions from the government or any other Regulator.eg. Hedge Funds (which employs diverse or complex trading strategies and invests and trades in securities having diverse risks or complex products including listed and unlisted derivatives).