NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Manager
A portfolio manager charges a fixed fee of 2% per annum on the average assets under management. A client's average AUM during the year is Rs 80 lakh and the portfolio ends with a gross profit of Rs 12 lakh, before the fee. What is the client's net return on the average AUM, ignoring taxes and other costs?
The net return is 13.0%. Gross profit of Rs 12 lakh on Rs 80 lakh is 15%, and the 2% fixed fee amounting to Rs 1.6 lakh is deducted, leaving Rs 10.4 lakh, which is 13% of average AUM.
- A13.0%Correct
- B15.0%
- C12.0%
- D17.0%
Explanation
Fixed fee = 2% of Rs 80 lakh = Rs 1.6 lakh. Net profit = 12 - 1.6 = Rs 10.4 lakh. Net return = 10.4/80 = 13.0%. Checking: gross 15% minus 2% = 13%. The 15.0% option ignores the fee, 12.0% is wrong, and 17.0% adds the fee instead of subtracting.
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