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100+ Free NISM Series XIX-E (Cat III AIF) Practice Questions

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Key Facts: NISM Series XIX-E (Cat III AIF) Exam

80 questions

NISM Series XIX-E has 80 questions (60 MCQs + 4 caselets) totalling 100 marks

NISM Assessment Structure

2 hours

Candidates must complete the exam in 120 minutes

NISM Assessment Structure

60% pass

The passing score for NISM Series XIX-E is 60 out of 100 marks

NISM FAQ

25% negative marking

Each wrong answer deducts 25% of the marks assigned to that question

NISM Assessment Structure

Rs. 1,500

The NISM Series XIX-E examination fee is Rupees one thousand five hundred plus GST

NISM FAQ

3 years

The NISM certificate is valid for 3 years from the date of the exam

NISM Certification Page

15 chapters

The Category III AIF curriculum is divided into 15 chapters

NISM Curriculum

100

Free original practice questions here

OpenExamPrep

NISM-Series-XIX-E is a SEBI-mandated certification from the National Institute of Securities Markets for Category III Alternative Investment Fund (AIF) managers and key investment teams. The exam has 80 questions (60 MCQs and 4 caselets) to be completed in 2 hours, with a 60% passing score and negative marking of 25% of the marks per wrong answer. The fee is Rs. 1,500 and the certificate is valid for 3 years. The syllabus is weighted toward investment strategies, valuation, and regulatory frameworks. This 100-question practice bank gives original mock practice across the full curriculum with detailed explanations for all options.

Sample NISM Series XIX-E (Cat III AIF) Practice Questions

Try these sample questions to test your NISM Series XIX-E (Cat III AIF) exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which of the following best describes alternative investments in comparison to traditional investments like public equities and fixed income?
A.Alternative investments generally have higher liquidity and lower transaction costs.
B.Alternative investments typically exhibit low correlation with traditional asset classes and may have complex fee structures.
C.Alternative investments are subject to the same strict daily valuation requirements as mutual funds.
D.Alternative investments are strictly limited to retail investors due to their low-risk profiles.
Explanation: Alternative investments generally offer diversification benefits due to their low correlation with traditional asset classes like stocks and bonds. They often feature specialized strategies, lower liquidity, and complex fee arrangements (e.g., performance fees).
2In the context of the Indian investment landscape, which of the following is considered a typical characteristic of a Private Equity (PE) investment compared to a Category III AIF?
A.PE investments are typically close-ended and invest in unlisted companies, whereas Category III AIFs often invest in listed securities and derivatives.
B.PE investments engage in active high-frequency trading using leverage, while Category III AIFs only take long-only physical positions.
C.PE investments have a typical fund life of 1 to 2 years, whereas Category III AIFs require a minimum lock-in of 15 years.
D.PE investments are classified under Category III AIFs under SEBI regulations, while hedge funds are Category II.
Explanation: Private Equity (PE) funds (usually Category II AIFs) typically invest in unlisted space with long-term close-ended structures. In contrast, Category III AIFs (hedge funds, long-short equity) often trade in listed equities, derivatives, and can employ leverage.
3Which of the following is a primary driver for institutional investors allocating capital to Category III Alternative Investment Funds?
A.The statutory guarantee of capital preservation provided by SEBI.
B.The search for absolute returns that are uncorrelated with the broader equity index.
C.The regulatory exemption from paying any income tax on distributions.
D.The ease of daily redemption without exit loads.
Explanation: Institutional investors seek Category III AIFs (like hedge funds) to gain exposure to strategies (like long-short or market neutral) that aim to generate absolute returns irrespective of broad market movements.
4Which of the following investment instruments is characterized by having its payoff tied to the performance of an underlying stock index but structured as a debt security with capital protection features?
A.Hedge Fund Units
B.Equity-Linked Debentures (ELDs)
C.Interest Rate Swaps
D.Commodity Futures
Explanation: Equity-Linked Debentures (ELDs) are structured products that combine a debt instrument (bond) with an option/derivative on an underlying index or stock, offering partial or full capital protection with equity upside.
5A structured product is designed such that the investor receives the principal back at maturity plus 80% of the positive return of the Nifty 50 index. If the Nifty 50 rises by 25% over the investment period, what is the total percentage return to the investor?
A.25%
B.20%
C.15%
D.80%
Explanation: The investor receives the principal back plus 80% of the positive index return. Return = 80% of 25% = 0.80 * 25% = 20%.
6What is the primary difference between investing in physical commodities and commodity derivatives for a Category III AIF?
A.Physical commodity investing is cheaper due to the lack of storage costs.
B.Commodity derivatives allow the fund to gain exposure through leverage and cash settlement without the burden of physical storage and logistics.
C.Physical commodities are highly liquid and trade on electronic screens 24/7, unlike derivatives.
D.SEBI completely prohibits Category III AIFs from trading in commodity derivatives.
Explanation: Commodity derivatives (like futures and options) allow funds to take leveraged positions and settle in cash, avoiding the high cost and logistical issues of physical storage, insurance, and delivery associated with physical commodities.
7An investor constructs a portfolio with 60% allocation to Asset A (expected return of 12%, standard deviation of 15%) and 40% allocation to Asset B (expected return of 8%, standard deviation of 10%). If the correlation coefficient between Asset A and Asset B is 0, what is the expected return and variance of the portfolio?
A.Expected Return: 10.4%, Portfolio Variance: 0.0097
B.Expected Return: 10.0%, Portfolio Variance: 0.0145
C.Expected Return: 10.4%, Portfolio Variance: 0.0225
D.Expected Return: 9.6%, Portfolio Variance: 0.0125
Explanation: Expected return = (0.60 * 12%) + (0.40 * 8%) = 7.2% + 3.2% = 10.4%. Portfolio Variance with zero correlation = (w1^2 * var1) + (w2^2 * var2) = (0.60^2 * 0.15^2) + (0.40^2 * 0.10^2) = (0.36 * 0.0225) + (0.16 * 0.01) = 0.0081 + 0.0016 = 0.0097.
8A Category III AIF has an expected portfolio return of 18% and a beta of 1.4. The risk-free rate is 6% and the expected return on the market index is 13%. What is the portfolio's Jensen's Alpha?
A.2.2%
B.4.2%
C.1.4%
D.3.0%
Explanation: According to CAPM, Expected Return = Rf + Beta * (Rm - Rf) = 6% + 1.4 * (13% - 6%) = 6% + 1.4 * 7% = 6% + 9.8% = 15.8%. Jensen's Alpha = Portfolio Return - CAPM Expected Return = 18% - 15.8% = 2.2%.
9If an AIF's portfolio has a Sharpe ratio of 0.8, a portfolio return of 14%, and the risk-free rate is 6%, what is the standard deviation of the portfolio?
A.10%
B.12%
C.15%
D.8%
Explanation: Sharpe Ratio = (Rp - Rf) / Sd. Thus, 0.8 = (14% - 6%) / Sd => 0.8 = 8% / Sd => Sd = 8% / 0.8 = 10%.
10Under Modern Portfolio Theory, systematic risk is best defined as which of the following?
A.Risk that can be completely eliminated through diversification across multiple sectors.
B.Market-wide risk caused by macroeconomic factors that affects all risky assets and is measured by Beta.
C.The risk specific to an individual company's operational decisions.
D.The risk of counterparty default in a private bilateral derivative transaction.
Explanation: Systematic risk (market risk) is non-diversifiable and stems from macroeconomic factors like inflation, interest rates, and political instability that affect the entire market. It is measured by Beta.

About the NISM Series XIX-E (Cat III AIF) Exam

NISM-Series-XIX-E: Category III Alternative Investment Fund Managers Certification Examination is a professional certification administered by the National Institute of Securities Markets. It is designed to create a common minimum knowledge benchmark for Category III AIF Managers and their key investment teams. The syllabus covers the entire AIF lifecycle, including product suitability, fund governance, valuation, performance measurement, legal documentation, and the regulatory environment. The examination has 80 questions to be completed in two hours, a 60% passing score and negative marking of 25% per wrong answer, and the certificate is valid for three years.

Assessment

80 questions in total: 60 multiple-choice questions of 1 mark each and 4 caselets with 5 sub-questions of 2 marks each, totalling 100 marks.

Time Limit

2 hours (120 minutes).

Passing Score

60% (60 out of 100 marks). Negative marking of 25% of the marks assigned to a question applies for each wrong answer.

Exam Fee

Rs. 1,500 (plus applicable payment gateway charges and GST). (National Institute of Securities Markets (NISM), established by SEBI.)

NISM Series XIX-E (Cat III AIF) Exam Content Outline

1%

Investments Landscape

Traditional vs. alternative asset classes, characteristics of AIFs, and global/Indian investment landscapes.

1%

Types of Investments

Direct equity, debt securities, derivative instruments, commodity products, and structured products.

1%

Introduction to Modern Portfolio Theory and Capital Market Theory

Portfolio return, portfolio variance, Sharpe, Treynor, and Jensen ratios, and the Capital Asset Pricing Model (CAPM).

3%

AIFs in India & its Suitability

Suitability of AIFs, minimum investment requirements, and investor classifications.

5%

AIF Ecosystem

Role of key service providers including sponsors, managers, trustees, custodians, and prime brokers.

10%

AIF Structuring

Legal structuring of AIFs as trusts, LLPs, or companies, and the concept of determinate vs. indeterminate trusts.

10%

Fee Structure and Fund Performance

Management fee models, carried interest (performance fee), hurdle rates, high-water marks, clawback provisions, and setup costs.

4%

Indices and Benchmarking

Benchmarking regulations, performance disclosures, and the choice of appropriate index benchmarks.

8%

Legal Documentations and Negotiations

Private Placement Memorandum (PPM), Contribution Agreement, Subscription Agreement, and Side Letters with MFN clauses.

12%

Investment Strategies

Long-short equity strategies, market-neutral investing, arbitrage, derivatives pricing, and gross/net leverage limits.

7%

Governance of Funds and Due Diligence

Fiduciary duties, conflicts of interest, code of conduct, and investment due diligence checks.

10%

Valuation

NAV calculation, independent valuer requirements, valuation of unlisted assets, and valuation policies.

10%

Fund Monitoring, Reporting and Exit

Reporting to SEBI and investors, material changes in the PPM, gate mechanisms, and winding up procedures.

8%

Taxation

Taxation of Category III AIFs at the fund level, maximum marginal rate (MMR), capital gains, business income, and indirect transfer rules.

10%

Regulatory Framework

SEBI (AIF) Regulations, FEMA guidelines, PMLA compliance, insider trading, and PFUTP regulations.

How to Pass the NISM Series XIX-E (Cat III AIF) Exam

What You Need to Know

  • Passing score: 60% (60 out of 100 marks). Negative marking of 25% of the marks assigned to a question applies for each wrong answer.
  • Assessment: 80 questions in total: 60 multiple-choice questions of 1 mark each and 4 caselets with 5 sub-questions of 2 marks each, totalling 100 marks.
  • Time limit: 2 hours (120 minutes).
  • Exam fee: Rs. 1,500 (plus applicable payment gateway charges and GST).

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

NISM Series XIX-E (Cat III AIF) Study Tips from Top Performers

1Focus heavily on the high-weight chapters: Investment Strategies (12%), Valuation (10%), Structuring (10%), Fee Structure (10%), and Regulatory Framework (10%) make up 52% of the total marks.
2Master the quantitative formulas for Modern Portfolio Theory (Sharpe, Treynor, Jensen's Alpha, CAPM) and derivatives pricing (payoffs, intrinsic value, Option Greeks).
3Understand the exact fee mechanics: carried interest calculations, hard vs soft hurdles, high-water marks, clawbacks, and setup expense amortization.
4Learn the taxation rules for Category III AIFs: unlike Category I and II, Category III has no statutory pass-through status. Taxation occurs at the fund level, often at the Maximum Marginal Rate (MMR) for business income.
5Get familiar with the caselet structure. Caselets are worth 2 marks each, and the 25% negative marking means each wrong answer deducts 0.50 marks.
6Use the official NISM Category III AIF workbook and practice timed mock tests to build speed and accuracy.

Frequently Asked Questions

How many questions are on the NISM Series XIX-E exam and how long is it?

The exam has 80 questions (60 MCQs of 1 mark each and 4 caselets of 5 questions each worth 2 marks each) totalling 100 marks, to be completed in 2 hours (120 minutes).

What is the passing score for NISM Series XIX-E?

The passing score is 60%, meaning you must score at least 60 out of 100 marks. There is negative marking of 25% for each incorrect answer.

Does NISM Series XIX-E have negative marking?

Yes. There is negative marking of 25% of the marks assigned to a question. For a 1-mark question, a wrong answer deducts 0.25 marks; for a 2-mark caselet question, a wrong answer deducts 0.50 marks.

What is the fee and certificate validity for NISM Series XIX-E?

The exam fee is Rs. 1,500 plus applicable GST and payment gateway charges. The certificate is valid for 3 years from the date of the examination.

Who is required to pass the NISM Series XIX-E exam?

It is designed for associated persons, fund managers, and key investment team members of Category III Alternative Investment Funds (AIFs) registered with SEBI.

Are these official NISM practice questions?

No. These are original OpenExamPrep questions modelled on the NISM-Series-XIX-E syllabus. NISM provides its own workbook and official registration on its website.