n NISM Certifications
X NISM Series X
Medium

Alternative Investment Funds (AIF) Category 3, which employs derivatives and complex strategies, is inherently more risky than PMS or traditional equity mutual funds due to leverage and sophisticated trading mechanisms.

Practice question from NISM Series XB- Investment Adviser (Level 2) Mock Test 1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    PMS is more risky as the portfolio can be concentrated

  2. AIF Category 3 is more risky as it uses derivatives and complex strategies

    Correct answer

  3. C

    Mutual Fund as there are many restrictions in investments

  4. D

    All of the above are equally risky

Why this is the answer

Category 3 AIFs involve leveraged and complex derivative strategies, making them riskier compared to PMS and mutual funds.

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