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Replying to a query raised by Athena Alternative Investment Fund, SEBI clarified that Cat III AIFs or long only funds or long and short funds cannot invest in units of mutual funds.
Athena AIF had asked SEBI if a Cat III AIF can invest in mutual funds on a permanent basis as a part of the multi asset portfolio. To this, SEBI said that investment in mutual funds is not covered under permissible investments by a Category III AIF.
However, the market regulator clarified that AIFs can park their un-invested portion or divestment proceeds in liquid funds or bank deposits.
Currently, Cat III AIF can invest in securities of listed and unlisted stocks, units of other AIFs, commodity derivatives, credit default swaps and so on.