AIF Distributors III
Distributor certification for Category III AIFs — long-short, leverage, derivatives, complex strategies.
Exam Pattern & Marking
Detailed Syllabus
10 chapters · 100 total marks
| # | Chapter | Marks | Practice Qs |
|---|---|---|---|
| 1 | Cat III AIF Fees and Performance | 15 | 75 |
| 2 | Cat III AIF Regulatory Framework | 15 | 75 |
| 3 | Cat III AIF Ecosystem | 12 | 60 |
| 4 | Cat III AIF Fund Structures | 12 | 50 |
| 5 | Cat III AIF Valuation | 12 | 60 |
| 6 | Cat III AIF Taxation | 10 | 50 |
| 7 | Cat III AIF Due Diligence and Risk | 8 | 25 |
| 8 | Cat III AIF Investment Strategies | 8 | 40 |
| 9 | Cat III AIF Good Practices | 4 | 25 |
| 10 | Cat III AIF Overview and Growth | 4 | 40 |
| Total | 100 | 500 |
Marks per chapter reflect the official NISM syllabus weightage. Practice question counts show the bank size in our app — use them to gauge depth of preparation needed per chapter.
Key Knowledge Areas
Overview
Series XIX-B is for distributors of Category III AIFs — the highest-leverage, most complex AIF category. Cat III AIFs include long-short equity, market-neutral, event-driven, multi-strategy, and similar hedge-fund-style vehicles. Distributors must understand both the strategy and the elevated risk profile before onboarding clients.
At a glance: 100 questions · 2 hours · 60% pass mark · 0.25 negative marking · ₹1,500 + GST.
Who should take XIX-B
- Distributors selling Cat III AIFs to HNI/UHNI
- RMs at private banks with hedge fund offerings
- Sales staff at long-short / multi-strategy AIF managers
Key Knowledge Areas
Cat III strategies
| Strategy | What it does |
|---|---|
| Long-short equity | Long undervalued, short overvalued — profits from spread |
| Market neutral | Net beta = 0; alpha-only |
| Event-driven | Trades on M&A, restructuring, special situations |
| Macro / multi-strategy | Combines equity, debt, commodities, FX |
| Quant / systematic | Algorithmic, factor-based |
Leverage in Cat III
Cat III AIFs can use leverage up to 2x the fund corpus (post-2024 SEBI clarifications). Leverage requires risk management overhead — VaR, stress testing, margin discipline.
Cat III taxation
Cat III is taxed at fund level — different from Cat I/II:
- Equity income: STCG 20%, LTCG 12.5% above ₹1.25L
- Debt / other income: at maximum marginal rate (usually 39%)
- Distributions taxed differently than fund-level returns
Investor suitability
₹1 crore minimum, 3-year lock-in typical. Cat III is for sophisticated investors who understand drawdown risk and tolerate volatility.
Performance & fees
Typical Cat III fee structure:
- Management fee: 1-2% of AUM annually
- Performance fee: 15-20% above hurdle rate, with HWM
- Hurdle rate: 8-10% (varies by manager)
Risk management
Distributors must explain:
- Maximum drawdown history
- Strategy capacity (how much AUM before alpha erodes)
- Counterparty exposure (prime broker, CCPs)
- Operational risks (mispricing, valuation, fraud)
Exam Tips
Tip 1: Cat III taxation (fund-level vs Cat I/II pass-through) is the most-tested distinction. Know it cold.
Tip 2: Leverage and risk management questions are common. Practise VaR concepts and stress-test scenarios.
Tip 3: Performance fee math (HWM + hurdle + catch-up + percentage above) is exam-favourite.
Tip 4: SEBI AIF Cat III specifics — 2x leverage cap, valuation requirements, monthly reporting — recur.
Try the Free Quiz
Test your knowledge with our free XIX-B practice quiz — or get the full bank of 500+ XIX-B questions plus mock tests in the NISM Exam Prep app.
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