Category III Alternative Investment Funds Managers Workbook is a comprehensive, exam-aligned resource for professionals managing or aspiring to manage Category III AIFs in India. Developed by the Certification team of the National Institute of Securities Markets (NISM), this workbook builds core and advanced competencies across investment theory, AIF ecosystem and structuring, governance, valuation, performance measurement, benchmarking, taxation, and the complete regulatory framework.

This book is intended for the following audience:

• AIF Managers & Investment Teams of Category III schemes (hedge/long-short, absolute-return, arbitrage, quant strategies)
• Compliance, Operations & Risk Professionals supporting AIFs and investment managers
• Valuation, Fund Accounting & Reporting Teams working with NAV, returns, and benchmarking
• Lawyers & Advisors engaged in AIF documentation, negotiations, and transaction support
• Students & Job Aspirants seeking a structured pathway into India’s securities markets and AIF industry

The Present Publication is the April 2025 Workbook Version. It is developed in collaboration with the Certification Team of NISM, Archit Lohia, Pratap Giri and Dr Rachana Baid and reviewed by Biharilal Deora. It is published exclusively by Taxmann, with the following noteworthy features:

• [End-to-end AIF Coverage] From investment theory foundations to advanced Category III strategies, risk, performance, governance, NAV, and exits
• [Practice-oriented Pedagogy] Illustrative caselets and MCQs
• [Regulatory Focus] SEBI (AIF) Regulations 2012, FEMA, PMLA, SEBI (PIT), SEBI (PFUTP), ICDR, FPI Regulations, FATCA/CRS—contextualised for Category III fund management
• [Valuation & Benchmarking Depth] Equity, fixed-income and business valuation approaches; risk-adjusted metrics, index methodologies, and performance benchmarking
• [Governance & Documentation] Fund constitution, IMAs, PPMs, subscription agreements, wrappers, and best-practice codes of conduct
• [Exam-ready Design] Lucid explanations, structured learning flow, and explicit mapping to syllabus weightages

The coverage of the book is as follows:

• Section A — Basics of Investments
  • Investment landscape; traditional vs. alternative assets; channels and portfolio roles
  • Modern Portfolio Theory & Capital Market Theory – Efficient frontier, CAPM, SML; risk/return estimation and optimisation
• Section B — Understanding the AIF Ecosystem
  • Evolution of AIFs in India, categories and suitability; Category III vs. traditional products; diversification and risk-management roles
  • AIF Structuring & Pooling – Trust/LLP/company forms; comparative analyses; fund anatomy
  • Fees & Performance – Management fees/expenses, hurdle rates, high-water marks, risk types and measures, pre/post-tax returns, risk-adjusted metrics
  • Indices & Benchmarking – Stock, bond, composite indices; methodologies; benchmarking principles
  • Legal Documentation & Negotiations – Constitutive documents, IMAs, PPMs, subscription agreements, support-service contracts
• Section C — Managing AIF Investments (Category III)
  • Investment Strategies employed by Category III AIFs
  • Governance & Due Diligence – Investor DD, agreements, conflict management, co-investments, codes of conduct, best practices
  • Valuation – Fixed-income basics; equity and business valuation (DCF, multiples, asset-based); NAV computation for Category III (including series); role of registered valuers; applicable regulations
  • Fund Monitoring, Reporting & Exit – Regulatory reporting, exit options, winding up, liquidation, and dissolution frameworks
• Section D — Taxation & Regulatory Framework
  • Taxation of AIFs & Investors – Set-off/carry-forward, GAAR, MLI, other applicable taxes with examples
  • SEBI (AIF) Regulations 2012 – Registration/eligibility, sponsor/manager commitment, open/close-ended schemes, accredited investors, closes and tenure, demat of units, corpus-raising, Category III operational/prudential/reporting norms, general obligations, inspection, codes, surveillance, disclosure and due diligence
  • FEMA – Inbound/overseas investment routes, foreign investments in/through AIFs
  • PMLA compliance and other SEBI regulations (PIT, PFUTP, ICDR, FPI) plus FATCA/CRS

The structure of the book is as follows:

• Logical Progression – Foundations → AIF ecosystem & structure → Category III portfolio management → Valuation & monitoring → Taxation & regulation
• Syllabus & Weightages – Clear mapping of chapters to marks (e.g., Strategies—12, Structuring—10, Performance—10, Valuation—10, Regulatory—10, Monitoring/Exit—10, etc.), enabling focused study planning
• Learning Aids – Definitions, worked illustrations, comparative tables, and annexures for quick revision and practical application

NISM is a leading provider of high-end professional education, certifications, training and research in financial markets. NISM Certification programs aim to enhance the quality and standards of professionals employees in various segments of financial services sector. NISM’s School of Certification of Intermediaries (SCI) develops and conducts certification examinations and Continuous Professional Education (CPE) programs that aim to ensure that professional meet the defined minimum common knowledge benchmark for various critical market functions like:

• Mutual Funds
• Equities
• Derivatives
• Securities Operations
• Compliance
• Research Analysis
• Investment Advice

These Certifications and CPE Programs are being developed and administered by NISM as mandated under ‘Securities and Exchange Board of India (Certification of Associated Persons in the Securities Market) Regulations, 2007’. The Certifications creates quality market professionals and catalyzes greater investor participating in the markets. Certifications also provides structured career paths to students and job aspirants in the securities market.