NISM XXI-A Flashcards – Free Active-Recall Practice

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Roles & PMS structures (7 cards)

What is SEBI?: Securities and Exchange Board of India. Regulates Portfolio Managers under the SEBI (Portfolio Managers) Regulations, 2020.
What is APMI?: Association of Portfolio Managers in India — the industry body PMS entities and distributors register with, similar to AMFI's role for mutual funds.
What is Portfolio Manager?: A body corporate who, under a contract with a client, manages or advises on a portfolio of securities/funds — discretionarily or non-discretionarily.
What is Discretionary PMS?: The manager independently manages each client's funds according to their needs, without seeking approval per transaction.
What is Non-discretionary PMS?: The manager acts only on the client's specific directions for each transaction.
What is Accredited investor?: An investor meeting specified wealth/income criteria, exempted from the standard Rs. 50 lakh PMS minimum investment requirement.
What is Co-investment portfolio manager?: A portfolio manager structure also exempted from the standard minimum investment requirement, as specified in the regulations.

Core definitions (25 cards)

What is Saving?: The difference between money earned and money spent.
What is Investment?: Committing savings with an expectation of receiving a higher amount in future, over a defined time period.
What is Capital preservation?: An investment objective pursued by highly risk-averse investors or for short-term needs — minimal risk-taking.
What is Capital appreciation?: An investment objective for long-term investors prepared to take risk for portfolio growth.
What is Primary market?: Where new securities are issued for the first time (IPO, FPO).
What is Secondary market?: Where existing securities trade between investors.
What is Systematic risk?: Market-wide risk that cannot be diversified away.
What is Unsystematic risk?: Company/sector-specific risk, reducible through diversification.
What is Technical analysis?: Studying price charts and volume patterns to time entries/exits, ignoring fundamentals.
What is Macaulay Duration?: Time (in years) to recover the initial bond investment in present-value terms.
What is Modified Duration?: Estimates a bond's percentage price change for a given change in interest rates.
What is Hedging?: Using a derivative to reduce an existing risk exposure.
What is REIT?: Real Estate Investment Trust — lets investors hold income-generating real estate in small, tradeable units.
What is InvIT?: Infrastructure Investment Trust — similar to a REIT, but for infrastructure assets like roads and power transmission.
What is Disclosure document?: Provided to prospective PMS clients, covering the manager's track record, fees, and risks.
What is High Water Mark?: The highest value a portfolio has ever reached; performance fees are charged only on gains above this prior peak.
What is Exit load?: A charge on early withdrawal from PMS, scaled down over 3 years to nil; no lock-in is permitted instead.
What is Investment approach?: The broad outlay of permitted securities/instruments agreed between client and portfolio manager.
What is Correlation?: How two assets' returns move in relation to one another; low correlation aids diversification.
What is Asset allocation decision?: The mix of equity, debt, and other assets in a portfolio — a primary driver of risk and return.
What is Rebalancing?: Bringing the portfolio's actual mix back toward the target allocation after market drift.
What is Performance attribution analysis?: Breaking down a portfolio's return into allocation effects versus security-selection effects.
What is Fiduciary capacity?: A portfolio manager's duty to act in the client's best interest, never deriving personal benefit from client funds.
What is Mis-selling?: Recommending unsuitable products or concealing material risks, often for higher compensation.
What is Portfolio Investment Scheme (PIS)?: The RBI-governed route NRIs typically use to invest in Indian securities, including via PMS.

Formulas & ratios (4 cards)

Formula for Sharpe Ratio?: (Return − Risk-free Return) ÷ Standard Deviation — Excess return per unit of TOTAL risk (standard deviation).
Formula for Treynor Ratio?: (Return − Risk-free Return) ÷ Beta — Excess return per unit of MARKET risk (beta).
Formula for Beta?: Covariance(asset, market) ÷ Variance(market) — A security's or portfolio's sensitivity to overall market movements.
Formula for Modified Duration (price impact)?: % price change ≈ − Modified Duration × Δ interest rate — Approximates the percentage price change for a given change in interest rates.

Key numbers (12 cards)

XXI-A exam structure?: 100 Q / 100 marks — 100 multiple choice questions, 1 mark each.
Exam duration?: 2 hours — Time allowed to complete the full XXI-A exam.
Passing score?: 60% — Minimum percentage required to pass.
Negative marking?: 10% per wrong answer — Deducted from the score for each wrong answer.
Minimum PMS investment?: Rs. 50 lakh — Standard floor per client (new clients/fresh investments); waived for accredited investors and co-investment PMs.
Exit load — year 1?: 3% — Maximum exit load chargeable on redemption in the first year of investment.
Exit load — year 2?: 2% — Maximum exit load chargeable in the second year of investment.
Exit load — year 3?: 1% — Maximum exit load chargeable in the third year of investment.
Exit load — after year 3?: Nil — Exit load chargeable after 3 years from the date of investment.
Lock-in on PMS investment?: Not permitted — Whether a portfolio manager may impose a lock-in on a client's investment.
Heaviest chapter?: 15 of 100 marks — Portfolio Management Process — asset allocation, correlation, steps, rebalancing.
Second-heaviest chapter?: 13 of 100 marks — Operational Aspects of Portfolio Managers — onboarding, disclosure, fees, High Water Mark.