Mutual Funds Module (Advanced) Practice Exam
Advanced mutual funds represent a specialized category of investment vehicles that go beyond conventional equity and debt instruments. These funds often employ sophisticated strategies and tools—such as leverage, derivatives, or short selling—to pursue targeted investment outcomes. They may also focus on niche markets or alternative asset classes like commodities, real estate, or private equity.
Examples include hedge funds and alternative investment funds, both of which demand a deeper understanding of market dynamics and a higher risk appetite. Due to their complexity, advanced mutual funds are best suited for experienced investors seeking diversified exposure and potentially higher, though more volatile, returns.
Why is the Mutual Funds Module (Advanced) important?
- Diversification: Advanced mutual funds offer a wider range of investment options, allowing investors to diversify their portfolios more effectively.
- Potential for Higher Returns: These funds may employ complex strategies that aim to outperform traditional mutual funds and benchmark indices.
- Access to Specialized Markets: Advanced mutual funds can provide access to markets or assets that are not easily accessible to individual investors.
- Risk Management: Some advanced mutual funds use sophisticated risk management techniques to mitigate potential losses.
- Professional Management: These funds are managed by experienced professionals who have the expertise to navigate complex market conditions.
- Tailored Investment Strategies: Advanced mutual funds can be tailored to meet specific investment objectives or risk preferences.
- Liquidity: Depending on the fund structure, advanced mutual funds can offer relatively high liquidity compared to other alternative investments.
Who should take the Mutual Funds Module (Advanced) Exam?
- Financial Analysts
- Portfolio Managers
- Investment Bankers
- Wealth Managers
- Fund Managers
- Financial Advisors
- Risk Managers
- Compliance Officers
- Institutional Investors
- Finance Professionals
Skills Evaluated
The candidate taking the certification exam on Advanced Mutual Funds is evaluated for the following skills:
- Knowledge of Advanced Investment Strategies
- Risk Management
- Portfolio Management
- Regulatory Compliance
- Financial Analysis
- Ethical Practices
Exam Format
- Duration: 120 minutes
- No. of questions: 60
- Maximum marks: 100, Passing marks: 60 (60%); There is negative marking for incorrect answers.
- Certificate validity: For successful candidates, certificates are valid for 5 years from the test date.
Course Outline
The exam covers the following topics:
1. Mutual Funds in perspective
- Mutual Funds
- Portfolio Management Schemes (PMS)
- Hedge Funds
- Venture Capital Funds & Private Equity Funds
2. Investments by Mutual Fund Schemes
- Equity
- Debt
- Derivatives
- Gold
- Real Estate
- International Investments
3. Valuation of Investments by Mutual Fund Schemes
- Equity: (i)Traded Securities (ii) Non-Traded / Thinly Traded / Unlisted Equities (iii) Warrants (iv) Rights
- Debt: (i) Money market and debt securities with residual maturity of upto 91
- days. (ii) Money market and debt securities with residual maturity of over 91 days (iii)
- Provisioning for Non-Performing Assets (NPA) (iv) Re-classification of NonPerforming Assets (NPA) and (v) Provisioning & Re-classification in case of rescheduling.
- Gold
- Real Estate
4. Mutual Fund Accounting
- Accounting for Income, Gains & Losses from investments
- Accounting for expenses
- Determining the N AV
- Accounting for Load
- Distributable Reserves
5. Novel Portfolio Structures in Mutual Fund Schemes
- Index Funds
- Exchange Traded Funds (ETFs)
- Arbitrage Funds
- Monthly Income Plans (MIP)
- Fixed Maturity Plans (FMP)
- Capital Protecting Oriented schemes
6. Quantitative Evaluation of Mutual Fund Schemes
- Returns – XIRR Dividend Re-investment (CGR), Compounding of periodic returns
- Risk – (i) Standard Deviation (ii) Beta (iii) Weighted Average Maturity (iv) Modified Duration
- Risk Adjusted Returns – (i) Sharpe ratio (ii) Sortino ratio (ii ) Treynor ratio (iv) Jensen’s Alpha.
7. Cut-off Time Regulations & Time Stamping
- Cut off Timing: (i) Liquid schemes & plans – Subscriptions (ii) Liquid schemes & plans – Repurchase (iii) Other than Liquid schemes & plans – Subscriptions (iv) Other than Liquid schemes & plans – Re-purchases
- Official Points of Acceptance (PoA)
- Time Stamping requirements
8. Investment in Mutual Funds through Exchange
- Listed Schemes
- Exchange Traded Funds (ETFs)
- Mutual Fund Service System (M FSS) – (i) Subscription (Physical mode) (ii)
- Subscription (Demat mode) (iii) Redemption ( Physical Mode ) (iv) Redemption (Demat Mode)
9. Non-Resident Investment in Indian M F Schemes
- Investment by NRIs / PIOs – repatriable basis and non-repatriable basis
- Investment by Foreign Institutional Investors
- Investment by Qualified Foreign Investors – (i) Direct Route (Demat) (ii) Indirect Route (Unit Confirmation Receipts – UCR)
10. Investment by Indians in International MF Schemes
- Foreign Direct Investment and Portfolio Investment
- Investing in International Mutual Fund Schemes – (i) Need to understand the international financial market (ii) Need to understand regulations regarding permissible investment (iii) Need to understand regulations regarding taxation (iv) Need to understand regulations regarding repatriation (v) Foreign currency risk (vi) Transaction costs
- Why invest abroad?
- International Fund of Funds
11. Mutual Fund Taxation
- Mutual Fund Tax Provisions – (i) Securities Transaction Tax (STT) (ii) Capital Gains Tax (iii) Tax on Income Distributed (iv) Tax deducted at source (TDS) / withholding tax
- Compounding Wealth, Gross of Tax – (i) Bank Fixed Deposit (ii) Mutual Fund
- Dividend Payout and Growth Options within schemes
- Double Indexation
- Setting Off & Carry Forward of losses
- Dividend stripping
12. SID, SAI, KIM and Fact Sheets
- Scheme Information Document (SID)
- Statement of Additional Information (SAI)
- Key Information Memorandum (KIM)
- Fund Account Statements / Consolidated Statement of Accounts
- Fact Sheets