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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Overview of Alternative Investment Funds (AIFs)

Meera Iyer invests Rs 1 crore in a Category II AIF. The fund has a hurdle rate of 10% per annum compounded, with 20% carry on profits, and no catch-up. At the end of 3 years her investment is valued at Rs 1.5 crore before carry. The hurdle-compounded value is Rs 1.331 crore. The carry applies only on returns above the hurdle (excess over Rs 1.331 crore). What is the value Meera receives after carry?

Meera receives Rs 1.4662 crore. The hurdle value is Rs 1.331 crore, so the excess is Rs 0.169 crore. Carry at 20% of that excess is Rs 0.0338 crore, which is deducted from Rs 1.5 crore, giving Rs 1.4662 crore after carry with no catch-up.

  1. ARs 1.4338 crore
  2. BRs 1.40 crore
  3. CRs 1.50 crore
  4. DRs 1.4662 croreCorrect

Explanation

Excess over hurdle = 1.5 - 1.331 = 0.169 crore. Carry at 20% = 0.0338 crore. Net value = 1.5 - 0.0338 = 1.4662 crore. Rs 1.4338 crore wrongly adds carry instead of subtracting it from the hurdle value; Rs 1.40 crore wrongly applies 20% to the whole Rs 0.5 crore profit (1.5 - 0.10).

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