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Curriculum- NISM-Series-XIX-E Category III Alternative Investment Fund Managers Certification Examination

SECTION A: BASICS OF INVESTMENTS
CHAPTER 1: INVESTMENTS LANDSCAPE

  1. Investment
  2. Investment Versus Speculation
  3. Investment Objectives
  4. Estimating the required rate of return

 

CHAPTER 2: TYPES OF INVESTMENTS

  1. Traditional Investments Vs. Alternative Investments
  2. Types of Traditional Investments
  3. Types of Alternative Investments
  4. Channels for making investments
  5. Role of Alternative Investments in Portfolio Management
  6. Alternative Investments – Antecedents and Growth

 

CHAPTER 3: INTRODUCTION TO MODERN PORTFOLIO THEORY AND CAPITAL MARKET THEORY

  1. Framework for constructing portfolios – Modern Portfolio Theory
  2. Assumptions of the theory
  3. Expected rate of return for individual security
  4. Variance of return for individual security (Ex-Ante Risk)
  5. Expected rate of return for a portfolio: (Ex-Ante Return)
  6. Variance of return for a portfolio
  7. Efficient Frontier
  8. Portfolio Optimization process
  9. Estimation issues
  10. Introduction to Capital Market Theory
  11. Assumptions of Capital Market Theory and the implication of relaxing these assumptions
  12. Capital Market Line
  13. Capital Asset Pricing Model (CAPM)
  14. Security Market Line

 

Section B: Understanding the AIF Ecosystem
CHAPTER 4: ALTERNATIVE INVESTMENT FUNDS IN INDIA AND ITS SUITABILITY

  1. Evolution and Growth of AIFs in India and Factors enabling preference for Indian AIF market
  2. Types of AIFs
  3. Comparison of Categories
  4. Suitability of AIF products to Investors
  5. Current AIF Market in India
  6. Comparison between Category III AIF and Traditional Investments
  7. Role of AIFs in Portfolio Diversification
  8. AIF as a Risk Management Tool

 

CHAPTER 5: ALTERNATIVE INVESTMENT FUND ECOSYSTEM

  1. Concepts prevalent in the AIF industry

 

CHAPTER 6: ALTERNATIVE INVESTMENT FUND STRUCTURING

  1. Principle of ‘Pooling’
  2. General ‘Pooling’ Considerations
  3. Anatomy of AIF Constitution
  4. Common Fund structures of AIF
  5. Comparative Analysis

 

CHAPTER 7: FEE STRUCTURE AND FUND PERFORMANCE

  1. Management Fees and Other Expenses
  2. Hurdle Rate
  3. High-Water Mark
  4. Risks in AIF
  5. Types of Risks in AIFs
  6. Risk Measures
  7. Return Measures in Alternative Investments
  8. Pre and Post Tax Returns
  9. Risk-adjusted Return Metrics and Performance Measures

 

CHAPTER 8: INDICES AND BENCHMARKING

  1. Index
  2. Uses of Indices
  3. Factors differentiating the indices
  4. Index Methodologies
  5. Stock market indices
  6. Bond Market Indices
  7. Stock-Bond (Composite) Indices
  8. Performance Benchmarking

 

CHAPTER 9: LEGAL DOCUMENTATION AND NEGOTIATIONS

  1. Introduction
  2. The Trust Document / Limited Liability Partnership Deed / Memorandum and Articles of Associations
  3. The Investment Management Agreement
  4. The Subscription (Investor Contribution) Agreement
  5. Private Placement Memorandum
  6. Wrapper
  7. Support Services Agreements

 

Section C: Managing AIF Investments – Category III AIFs
CHAPTER 10: INVESTMENT STRATEGIES

  1. Investment Strategies used by Category III AIFs

 

CHAPTER 11: GOVERNANCE OF FUNDS AND DUE DILIGENCE

  1. Investor Due Diligence
  2. Definitive Agreements
  3. Regulation on Governance Structure in AIF
  4. Role of Human Capital in avoiding Conflict of Interests
  5. Co-investments in AIFs
  6. Code of Conduct of Investment Managers of AIFs and Investment Committee
  7. Industry Best Practices

 

CHAPTER 12: VALUATION

  1. Introduction
  2. Valuation Basics for Fixed Income Instruments
  3. Approaches to Equity Valuation
  4. Approaches to Business Valuation
  5. Asset based Valuation
  6. Discounted Cash Flow (DCF) Valuation
  7. Relative or Multiple based Valuation
  8. Net Asset Value (NAV)
  9. Valuation Techniques
  10. Computation of NAV for a Category III AIF vs. NAV attributable to a series of units issued to investors
  11. Valuation Regulations
  12. Role of third-party Registered Valuers

 

CHAPTER 13: FUND MONITORING, REPORTING AND EXIT

  1. Monitoring Alternative Investment Fund Progress and Performance
  2. Context and Scope of Effective Fund Monitoring
  3. Regulatory Framework for Fund Monitoring and Reporting
  4. Fund Reporting
  5. Exit Options
  6. Winding Up of an AIF
  7. Liquidation Scheme
  8. Dissolution Period

 

Section D: Taxation and Regulatory Framework
Chapter 14: TAXATION

  1. Taxation of AIFs
  2. Set off and carry forward of loss under the ITA
  3. GAAR
  4. MLI
  5. Other applicable taxes
  6. Examples

 

CHAPTER 15: REGULATORY FRAMEWORK
A. SEBI (Alternative Investment Funds) Regulations, 2012

  1. Registration Process and Eligibility Criteria
  2. Sponsor / Manager Commitment
  3. Concept of Open-ended and Close-ended Funds
  4. Accredited Investor Framework
  5. First Close, Final Close and Tenure of Funds / Schemes
  6. Investors’ subscription to the Fund/Scheme
  7. Dematerialization of AIF Units:
  8. Raising Corpus Capital
  9. Investment Conditions applicable to AIFs
  10. Guidelines on Operational, Prudential and Reporting Norms for Category III AIFs
  11. General Obligations and Responsibilities of AIFs
  12. Pro-rata and Pari-passu Rights of Investors
  13. Inspection
  14. Code of Conduct for AIFs
  15. Market Surveillance by AIFs
  16. Exemption from enforcement of the regulations in special cases
  17. Periodic Disclosures and Reporting
  18. Specific due diligence of investors and investments of AIFs

 

Section D: Taxation and Regulatory Framework
Chapter 14: TAXATION

  1. Taxation of AIFs
  2. Set off and carry forward of loss under the ITA
  3. GAAR
  4. MLI
  5. Other applicable taxes
  6. Examples

 

B. Foreign Exchange Management Act, 1999

  1. FDI and its Economic Significance
  2. Investment Framework under FEMA
  3. Inbound Foreign Investment Routes
  4. Foreign Investments in AIFs
  5. Overseas Investments by AIFs

 

C. Prevention of Anti-Money Laundering Act, 2002

  1. 15.23 Regulatory Oversight

 

D. Other related SEBI Regulations

  1. SEBI (Prohibition of Insider Trading) Regulations, 2015
  2. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations, 2003
  3. SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018
  4. SEBI (Foreign Portfolio Investors) Regulations, 2019
  5. Foreign Account Tax Compliance Act and Common Reporting Standard
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