NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Scheme Related Information
A Mutual fund scheme's portfolio had an average market value of Rs 400 crore during a year, and the total value of securities purchased was Rs 300 crore while securities sold was Rs 220 crore. Using the lower of purchases or sales as the numerator, what is the portfolio turnover ratio?
The portfolio turnover ratio is 55%. It is calculated as the lower of purchases (Rs 300 crore) or sales (Rs 220 crore), which is Rs 220 crore, divided by the average portfolio value of Rs 400 crore. Using the purchase figure would wrongly give 75%.
- A55%Correct
- B75%
- C65%
- D80%
Explanation
Portfolio turnover = lower of purchases or sales divided by average net assets. The lower is Rs 220 crore (sales). 220/400 = 0.55 = 55%. Using purchases gives 75%, a common mistake from using the higher figure, and 80% would come from averaging incorrectly.
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