Collective Investment Vehicles: formula sheet

Key formulas

Investor's share of the pool

Investor's share = Units held ÷ Total units outstanding

Gains, losses and expenses are shared in proportion to units held.

Number of units

Units = Amount invested ÷ Price (NAV) per unit

Units are the way ownership of the pool is measured.

Core features to remember

Pooling + Professional management + Diversification + Proportionate sharing

Any option missing pooling is not describing a CIV.

Three-tier structure

Sponsor → Trust (trustees) → AMC

Sponsor creates the trust, trustees hold assets for unit holders, AMC manages the schemes.

NAV per unit

NAV = (Market value of assets − Liabilities) ÷ Number of units outstanding

Liabilities include accrued expenses. Used for purchase and redemption prices.

Open-ended vs close-ended

Open-ended: continuous entry and exit | Close-ended: fixed maturity, exit via listing or maturity

Interval schemes allow transactions only at specified intervals.

SEBI scheme groups

Equity | Debt | Hybrid | Solution oriented | Other (index funds, ETFs, FoFs)

Each group has defined sub-categories with set investment rules.

Regulator and law

Mutual fund → SEBI (Mutual Funds) Regulations, 1996; PMS → SEBI (Portfolio Managers) Regulations, 2020

Both are regulated by SEBI, under different regulations. Do not mix them up.

Minimum investment

PMS: ₹50 lakh per client (cash or securities); Mutual fund: small, set by the scheme

The PMS minimum is a regulatory floor. A relaxation exists for accredited investors.

What the investor holds

Mutual fund → units of a pooled scheme; PMS → securities in the client's own name

This difference drives customisation and tax.

Customisation

Mutual fund → same portfolio for all unitholders; PMS → portfolio can be tailored to the client

Customisation is highest in non-discretionary PMS.

Tax point

Mutual fund → tax on redemption of units; PMS → tax on each sale in the client's portfolio

PMS churning can create tax in the client's hands every year.

Minimum investment per investor

₹1 crore

General rule for all AIF categories. Angel funds: ₹10 lakh. Employees or directors of the AIF or its manager: ₹25 lakh.

Minimum corpus of a scheme

₹20 crore

Angel funds need a lower minimum corpus of ₹5 crore.

Maximum investors in a scheme

1,000 investors

Angel funds are limited to 200 investors.

Fund structure

Category I and II = close-ended; Category III = open-ended or close-ended

Category I and II have a minimum tenure of 3 years.

Leverage

Category I: no leverage except limited temporary borrowing; Category II: no leverage except to meet day-to-day operational needs; Category III: leverage permitted

Category I temporary borrowing is capped at 30 days, four occasions in a year and 10% of investible funds.

Concentration limit in one investee company

Category I and II: 25% of investible funds; Category III: 10% of investible funds

Applies to investment in a single investee company.

Manager or sponsor continuing commitment

Category I and II: lesser of 2.5% of corpus or ₹5 crore; Category III: lesser of 5% of corpus or ₹10 crore

Shows the manager has money in the fund alongside investors.

Minimum distribution rule

Minimum distribution = 90% × net distributable cash flows (SPVs to the trust, and the trust to unit holders)

Applies to both REITs and InvITs. The trust must receive not less than 90% of the SPVs' net distributable cash flows and distribute not less than 90% of its own to unit holders, at least half-yearly. It is a minimum payout requirement, not a guaranteed return.

Distribution per unit

Distribution per unit = total distribution ÷ number of units outstanding

Use this for simple numerical questions.

REIT asset focus

REIT = real estate, rent-generating; InvIT = infrastructure, tariff or toll-generating

The asset type is the quickest way to tell them apart.

Trust parties

REIT: sponsor, manager, trustee. InvIT: sponsor, investment manager, trustee

The trustee is SEBI-registered and holds assets for unit holders.

VCF classification

Venture capital fund = Category I AIF; private equity fund = Category II AIF

The old standalone venture capital fund regulations were replaced by the SEBI AIF Regulations, 2012.

AIF investor minimum

Minimum investment per investor in an AIF = ₹1 crore

The exception is ₹25 lakh for employees or directors of the AIF or its manager. Concessions for accredited investors are limited and apply only to certain AIF structures, so do not assume them. Read the question for any such condition.

AIF minimum corpus and tenure

Minimum corpus = ₹20 crore for each scheme; Category I and II AIFs are closed-ended with a minimum tenure of 3 years

Angel funds have a lower minimum corpus (₹5 crore). Category III funds can be open-ended.

Quick revision

• A collective investment vehicle pools money from many investors under one manager.
• In a mutual fund, investors hold units of a pooled scheme and share returns in proportion.
• In PMS, the portfolio is typically held for the individual client, not pooled into units.
• A mutual fund scheme is open-ended or close-ended; know how each allows entry and exit.
• Mutual funds are regulated under SEBI's mutual fund regulations; AIFs have their own SEBI regulations.
• Know the AIF categories and what each category is meant to do.
• AIFs are privately pooled vehicles, not retail products like typical mutual fund schemes.
• A REIT pools money to invest in income-producing real estate.
• An InvIT pools money to invest in infrastructure assets.
• A venture capital fund invests in early-stage or high-growth unlisted businesses.
• Check minimum investment amounts and limits in the latest workbook before the exam.
• Read each option fully; the trap is often a feature of one vehicle attributed to another.

Common mistakes

• Thinking pooling removes risk. Fix: Diversification reduces risk from single securities. Market risk remains and returns are not guaranteed.
• Treating PMS as a collective investment vehicle. Fix: In PMS, each client's portfolio is separate and held in the client's name. In a CIV, money is pooled.
• Saying the sponsor manages the fund's investments. Fix: The AMC manages investments. The sponsor only sets up the fund and the trust.
• Saying the AMC holds the assets for unit holders. Fix: The trustees hold the assets for unit holders. The AMC acts under their supervision.
• Saying a PMS client owns units of a pool. Fix: In PMS the securities are held for the client individually. Units belong to mutual funds.
• Giving the wrong regulation, such as the Mutual Fund Regulations for PMS. Fix: Link PMS with Portfolio Managers Regulations, 2020 and mutual funds with Mutual Funds Regulations, 1996.
• Saying all AIFs are close-ended. Fix: Only Category I and II must be close-ended. Category III may be open-ended or close-ended.
• Treating Category II as the one allowed to use leverage. Fix: Category II may not borrow except to meet day-to-day operational needs. Leverage is a Category III feature.
• Saying a REIT invests in infrastructure or an InvIT invests in real estate. Fix: Tie the vehicle to its asset: REIT to rent-earning property, InvIT to infrastructure projects.
• Treating the 90% distribution as a guaranteed return. Fix: Remember it is 90% of net distributable cash flows. If cash flows fall, the payout falls.

Exam tips

• Expect definition and benefit questions. Learn the five benefits in your own words.
• Reject options with words like 'guaranteed', 'risk-free' or 'eliminates'.
• Know the contrast between CIV (pooled) and PMS (individual portfolio). It is a common trap.
• Be able to match each vehicle to its underlying asset.
• This paper has negative marking of 10% of the marks for a question, so skip only if you truly cannot narrow to two options.
• Learn the role of each party in one line; questions often swap roles between sponsor, trustees and AMC.
• Separate structure (open, close, interval) from objective (equity, debt, hybrid); options often mix them.
• Know the ETF versus index fund difference: exchange trading versus buying at NAV.