Sample Questions

NISM-Series-19B: Alternative Investment Funds (Category III) Distributors Mock Tests — 5 random MCQs with answers & explanations

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These 5 questions are randomly selected (standard MCQs only, not case-based).

Q1 What is a key factor disclosed in the PPM's "Terms of the Fund/Scheme" section?

A. Whether open or closed fund and fund tenure. Correct Answer
B. Prior experience of the manager.
C. Targeted securities.
D. Valuation techniques used.

Explanation:

The "Term of the Fund/Scheme" section states the fund structure, term, and whether it is open or closed.

Marks: 1

Q2 Which investment strategy relies on the judgement and expertise of the investment manager to make investment decisions in the futures market?

A. Quantitative Strategies.
B. Algorithmic Trading Strategies.
C. Discretionary Investment Strategies. Correct Answer
D. Systematic Investment Strategies.

Explanation:

Discretionary Investment Strategies rely on the judgement and expertise of the investment manager.

Marks: 1

Q3 What is a key service that Distributors should provide to investors regarding information from the investment manager?

A. To guarantee the accuracy of all reports.
B. To create the reports themselves.
C. To dictate the content of the reports.
D. To serve as a Point of Contact (POC) for support, such as receiving periodic investor reports. Correct Answer

Explanation:

Distributors should serve as a POC for investor support, including facilitating receipt of reports.

Marks: 1

Q4 Which type of Hedge Fund structure invests in units of other Hedge Funds, potentially increasing fees due to multiple layers of management fees?

A. Fund of Hedge Funds (FoHF). Correct Answer
B. Single-strategy Hedge Funds.
C. Multi-strategy Hedge Funds.
D. Commodity Trading Advisors (CTAs).

Explanation:

Funds of Hedge Funds (FoHF) invest in other hedge funds, resulting in multiple layers of fees.

Marks: 1

Q5 For the purpose of regulatory reporting and benchmarking of a Category III AIF scheme, how is Assets Under Management (AUM) defined?

A. The total capital commitment agreed upon by investors in the Contribution Agreement
B. The total capital drawn down under the scheme Correct Answer
C. The face value of total units allotted to the Sponsor
D. The maximum permissible leverage limit under SEBI regulations

Explanation:

Under SEBI benchmarking and operational guidelines, AUM for reporting and benchmarking purposes is defined as the total capital drawn down under the scheme.

Marks: 1

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Sample Questions

Q1 What is a key factor disclosed in the PPM's "Terms of the Fund/Scheme" section?

Q2 Which investment strategy relies on the judgement and expertise of the investment manager to make investment decisions in the futures market?

Q3 What is a key service that Distributors should provide to investors regarding information from the investment manager?

Q4 Which type of Hedge Fund structure invests in units of other Hedge Funds, potentially increasing fees due to multiple layers of management fees?

Q5 For the purpose of regulatory reporting and benchmarking of a Category III AIF scheme, how is Assets Under Management (AUM) defined?

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