n NISM Certifications
NSM General NISM
Medium

What is one key reason Category III AIFs are considered high risk?

Practice question from CWM A B1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    They only invest in fixed deposits

  2. B

    They avoid market exposure

  3. They use complex and leveraged strategies

    Correct answer

  4. D

    They guarantee returns

Why this is the answer

Category III AIFs often employ leverage, derivatives, and sophisticated trading approaches that can significantly increase risk and volatility.

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