Mutual Fund Mastery interview preparation

Questions

100

Traced to a firm

32

Firms

19

Updated

September 2026

Asked at

All firmsVanguard5BLBlackRock3FTFranklin Templeton3Invesco3PIMCO3Fidelity Investments2J.P. Morgan2Morningstar2Neuberger Berman2SCSchroders2T. Rowe Price2Amundi1BMBNY Mellon1Goldman Sachs1Man Group1Northern Trust1SSState Street1Sycamore Partners1WMWellington Management1

Topic

All topicsFund structure and regulation7NAV and operations6Scheme categorisation4Equity schemes5Debt schemes7Risk, liquidity and disclosure7Index funds and ETFs6Hybrid and solution schemes3Costs, plans and commissions6SIP and investor mechanics5Performance measurement6Taxation5Distribution, compliance and NISM5Portfolio construction and advice5Estimation and numeracy5Markets and industry6Career and fit12

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitBrainteaserMarket view

1. 001What is a mutual fund, and what is it actually solving for an investor?Fund structure and regulationCorephone / first roundIndian AMCsDistribution and sales

   Say this

   A mutual fund is a pooled vehicle: many investors put money into a trust, a professional manager buys securities with it, and each investor owns units representing a proportionate slice of that portfolio. What it really sells is three things a small investor cannot buy on their own — diversification, professional management and operational scale.

   Then walk it

   1. Pooling is the mechanism. With 5,000 rupees you cannot own 50 stocks. Inside a fund your 5,000 buys a proportionate claim on all 50.
   2. The second thing you are buying is a research and dealing desk you could not hire. A fund manager with analysts, broker access and a compliance framework, for 50 to 150 basis points a year.
   3. The third is operations, and people underrate it. Custody, corporate action processing, tax reporting, nomination, transmission on death — the RTA does all of that for you.
   4. In India it is also a regulated wrapper. SEBI caps what the scheme can hold, caps the expense ratio, mandates daily NAV and mandates portfolio disclosure every fortnight. A PMS or an unregistered scheme gives you none of that.
   5. The honest limitation: you are buying average, minus fees. You do not control the entry price, you cannot exclude a stock you dislike, and roughly half of active equity funds will underperform their benchmark over any long window. What you get is a floor on how badly you can do relative to the market, not alpha.

   Where candidates lose it

   Defining it as 'a scheme that invests in stocks'. That is a description, not an answer. The interviewer wants to hear pooling, proportionate ownership through units and the three things the investor is actually paying for. Saying the limitation out loud in a first-round answer is what marks you as someone who has read beyond the brochure.

   Expect next

   • Then why does anyone buy a direct stock portfolio instead?
   • How is a mutual fund different from a PMS or an AIF?
   • Who bears the loss if the fund manager makes a bad call?
2. 002Walk me through the structure of an Indian mutual fund. Who are the parties and who does what?Fund structure and regulationCoretechnicalIndian AMCsRegistrars and transfer agents

   Say this

   Five parties. The sponsor sets it up and puts in the capital, the trustees hold the assets in trust for unitholders, the AMC manages the money for a fee, the custodian holds the securities, and the RTA keeps the unitholder records. SEBI sits above all of it.

   Then walk it

   1. Sponsor: the promoter, like HDFC Ltd for HDFC AMC or the State Bank for SBI Funds Management. It contributes at least 40 percent of the AMC's net worth and is the party SEBI holds accountable for eligibility.
   2. Trustees: a trustee company or a board of trustees, at least two-thirds independent. The scheme's assets legally vest in them, and they owe a fiduciary duty to unitholders, not to the sponsor. They approve scheme launches and sign off on the AMC's compliance.
   3. AMC: the entity you would actually work for. Minimum 50 crore net worth, at least half its board independent. It employs the fund managers, runs the investment process and charges the management fee out of the scheme.
   4. Custodian: a SEBI-registered custodian, independent of the sponsor, that holds the securities and handles settlement and corporate actions. This separation is what stops an AMC from quietly moving assets.
   5. RTA: CAMS or KFintech for most of the industry. Folios, purchases, redemptions, SIP mandates, statements, KYC records. Operationally it is where most entry-level mutual fund jobs actually sit.
   6. The point of the split is that no single party touches both the money and the records. The AMC decides, the custodian holds, the RTA accounts, the trustee supervises.

   Where candidates lose it

   Collapsing the AMC and the fund into one thing. Your money is not with the AMC — it is with a trust, and that is exactly why an AMC going bust does not take the scheme's assets down with it. If you cannot say who legally owns the securities, you have failed a first-round structure question.

   Expect next

   • If the AMC went insolvent tomorrow, what happens to my units?
   • Who appoints the trustees, and how independent are they really?
   • What does the custodian do that the RTA does not?
3. 003Why is an Indian mutual fund constituted as a trust rather than a company?Fund structure and regulationIntermediatetechnicalIndian AMCsCompliance and legal

   Say this

   Because a trust ring-fences the assets and passes income straight through. Under the SEBI Mutual Fund Regulations of 1996 the fund must be a trust under the Indian Trusts Act, so the securities vest in the trustees for the benefit of unitholders and never sit on the AMC's balance sheet.

   Then walk it

   1. Ring-fencing is the first reason. In a trust, unitholders are beneficiaries with a direct beneficial interest in the assets. The AMC's creditors cannot reach them.
   2. Tax is the second, and it is the bigger practical reason. A SEBI-registered mutual fund is exempt under section 10(23D), so income is not taxed at the fund level — the investor pays only on redemption. A company structure would tax profits at the entity and again in the investor's hands.
   3. Flexibility is the third. A company can only distribute out of profits and has to deal with share capital rules. A trust can create and cancel units continuously at NAV, which is what makes an open-ended scheme possible at all.
   4. It also separates supervision from management cleanly. The trustee's duty runs to the beneficiaries; a company's board owes its duty to the company. That distinction is why SEBI can hold the trustee responsible for protecting unitholders against its own sponsor.
   5. The limitation worth flagging: trustee oversight is only as good as the independent trustees, and they meet quarterly with information supplied by the AMC. SEBI's own orders on the 2020 debt fund wind-ups show that the structure is a legal safeguard, not an operational one.

   Where candidates lose it

   Answering only 'for tax reasons'. That is half of it. The examinable half is that unitholders are beneficiaries, so the assets are legally separate from the AMC. And do not say the AMC owns the scheme — it manages it under an investment management agreement with the trustee.

   Expect next

   • What is the investment management agreement between the trustee and the AMC?
   • How does a US 40 Act fund achieve the same separation?
   • Who has the power to remove the AMC?
4. 004What do the trustees actually do, and how independent are they in practice?Fund structure and regulationHardtechnicalIndian AMCsCompliance and legal

   Say this

   Legally they are the owners of the scheme's assets and the primary supervisors of the AMC. Practically, they are a quarterly oversight board with a small staff who rely almost entirely on what the AMC reports to them, which is the structural weakness of the model.

   Then walk it

   1. The formal duties: approve every new scheme, ensure the AMC invests within the SID mandate, certify compliance to SEBI twice a year, review investor complaints and net worth, and confirm no conflict of interest in transactions with associates.
   2. Composition is the safeguard. At least two-thirds of trustees, or of the trustee company's directors, must be independent of the sponsor. A trustee cannot simultaneously be an AMC director.
   3. They can remove the AMC. That is the nuclear option and it has effectively never been used in India, which tells you something about how the relationship works in practice.
   4. SEBI tightened this after 2020. Trustees now have an explicit duty to independently evaluate fairness of fees, mis-selling, and unusual scheme performance, and must appoint their own audit firm rather than relying only on AMC-supplied reports.
   5. The honest assessment: the sponsor pays for the trustee company, the AMC produces the data, and the information asymmetry is enormous. The Franklin Templeton wind-up ran through a trustee-approved process. If asked whether the model works, say it is a necessary legal separation with weak informational teeth, and that is why SEBI regulates the AMC directly as well.

   Where candidates lose it

   Saying trustees 'manage the fund'. They do the opposite — they supervise the manager. And if you claim the structure makes fraud impossible, an interviewer who has lived through 2020 will push back hard. Acknowledge the information gap.

   Expect next

   • What did SEBI change about trustee responsibilities after the 2020 debt wind-ups?
   • Who audits the trustee?
   • Give me an example of a conflict the trustee is supposed to catch.
5. 005What does SEBI require of a sponsor before it can launch a mutual fund, and what does the custodian do?Fund structure and regulationIntermediatetechnicalIndian AMCsCompliance and legal

   Say this

   The sponsor route is about track record and skin in the game: five years in financial services, positive net worth every year, profits in three of the last five, and at least 40 percent of the AMC's net worth contributed by the sponsor. The custodian is the separate pair of hands — it holds the securities and settles the trades so the AMC never controls the assets it manages.

   Then walk it

   1. Sponsor eligibility in substance: a credible financial services business, clean regulatory record, and the 40 percent contribution to the AMC's minimum 50 crore net worth. SEBI wants a party with something to lose.
   2. SEBI later opened an alternate route for sponsors without the five-year record, provided they bring a much larger locked-in net worth and commit to keeping it. That is how newer players and fintech-backed AMCs got in.
   3. Custodian duties: safekeeping of securities in the scheme's name, trade settlement, collecting dividends and interest, tracking corporate actions like bonus and rights, and reconciling holdings with the AMC daily.
   4. Independence is the rule that matters. The custodian must be registered with SEBI and cannot be an associate of the sponsor unless specific conditions are met, precisely so that two unrelated parties have to agree before an asset moves.
   5. For equities most of it now sits in demat with the depository, so the custodian's real value shows up in debt, in foreign securities and in corporate action processing — which is exactly where the operational errors happen.
   6. One caveat: a custodian confirms that securities exist and are in the scheme's name. It does not judge whether the price at which they are carried is right. Valuation failures in illiquid debt are not a custody problem.

   Where candidates lose it

   Reciting the sponsor's numeric tests and stopping. The 40 percent contribution is the interesting part — it is alignment, not paperwork. On the custodian, do not confuse it with the RTA: the custodian holds securities, the RTA holds investor records.

   Expect next

   • Why does SEBI insist the custodian is independent of the sponsor?
   • What is the alternate eligibility route for a new sponsor?
   • Who is responsible if a corporate action is missed?
6. 006What are the SID, the SAI and the KIM, and which one would you actually read?Fund structure and regulationIntermediatetechnicalIndian AMCsDistribution and sales

   Say this

   The SID is the scheme document — objective, asset allocation, benchmark, risk factors, load structure, fund manager. The SAI is the statutory information about the fund house that is common to all its schemes. The KIM is the two-page summary attached to the application form. You read the SID, and specifically the asset allocation table.

   Then walk it

   1. Scheme Information Document: the one that binds the manager. The asset allocation table gives the minimum and maximum in each instrument, and anything outside it is a mandate breach, not a style choice.
   2. Statement of Additional Information: sponsor and trustee details, AMC management, legal and tax framework, valuation policy, associate transactions. Filed once and updated annually, so nobody reads it until there is a dispute.
   3. Key Information Memorandum: the abridged SID that must legally accompany the application form. Useful as a checklist, useless as diligence.
   4. In practice I would read four things in the SID: the asset allocation range, the benchmark, where it says the scheme can invest in derivatives or foreign securities or REITs, and the exit load. Those four determine almost everything about how the fund can behave.
   5. Then the fortnightly and monthly portfolio disclosures, because the SID tells you what the fund may do and the portfolio tells you what it is doing. A flexi cap that may hold anything but has been 85 percent large cap for three years is a large cap fund in practice.
   6. The limitation: SIDs are drafted wide on purpose. A range of 65 to 100 percent equity tells you almost nothing, so the document sets the outer boundary and the disclosure history does the real work.

   Where candidates lose it

   Getting the three acronyms right and offering no judgement on which matters. Anyone can memorise the list. The answer that lands names the asset allocation table as the binding constraint and points out that wide ranges make the SID a floor for diligence, not the whole of it.

   Expect next

   • How often are the SID and SAI updated?
   • Where in the SID would you find how the scheme values illiquid debt?
   • What is a fundamental attribute, and what happens if the AMC changes one?
7. 007Compare the Indian mutual fund structure with a US 40 Act fund and a European UCITS.Fund structure and regulationHardsuperdayGlobal asset managersGCC and KPO research centres

   Say this

   All three are daily-dealing, diversified, retail-regulated vehicles, but they get there differently. India uses a trust with independent trustees. The US uses a corporation with an independent board that renegotiates the advisory contract every year. UCITS uses a European directive with hard-coded diversification limits and a cross-border passport.

   Then walk it

   1. India: SEBI Mutual Fund Regulations 1996, trust structure, prescriptive scheme categories since 2017, capped expense ratios by AUM slab, and mandatory portfolio disclosure. Very rules-based on what a scheme may hold.
   2. US: Investment Company Act of 1940. The fund is a company with a board, mostly independent directors, and section 15(c) requires that board to approve the advisory fee annually — governance does the work that SEBI's TER slabs do in India.
   3. UCITS: a directive, mostly domiciled in Luxembourg or Ireland, with the 5-10-40 diversification rule, eligible asset restrictions, and a derivative exposure limit measured by commitment or VaR. Once authorised in one member state it can be sold across the EU on a passport.
   4. Disclosure differs in flavour. India mandates a risk-o-meter and fortnightly portfolios. UCITS has a short KID with a numeric risk indicator. The US relies on the prospectus, the SAI and quarterly holdings filings.
   5. The sharpest structural contrast is fee regulation. India caps the TER by regulation. The US caps nothing and lets an independent board and competition do it — which is how Vanguard's at-cost model pushed the industry to single-digit basis points.
   6. Why it matters for an interview at an Indian AMC or a GCC: cross-listed feeder funds, FPI flows and offshore India funds all sit in one of these wrappers, and the tax and disclosure treatment follows the wrapper, not the strategy.

   Where candidates lose it

   Treating this as trivia. The examinable idea is that India regulates the product, the US regulates governance, and Europe regulates portfolio limits and then lets the passport handle distribution. If you can state that in one line you have answered it even if you forget the 5-10-40 detail.

   Expect next

   • What is the 5-10-40 rule?
   • Why can a UCITS be sold across Europe but an Indian scheme cannot?
   • Which structure gives an investor better protection, and why?
8. 008What makes up a NAV?NAV and operationsCoretechnicalMan GroupEquity Hedge · Boston · 2019

   Say this

   Market value of all the scheme's assets, plus receivables, minus all liabilities and accrued expenses, divided by the number of units outstanding. The two things people forget are the accrued expenses — the TER is charged daily, not annually — and that units outstanding changes every day in an open-ended fund.

   Then walk it

   1. Assets: securities at market value, cash and bank balances, accrued interest and dividend receivable, and receivables on trades done but not settled.
   2. Liabilities: payables on unsettled purchases, redemption payable, and the accrued portion of the expense ratio, management fee, audit fee, custody and RTA charges.
   3. Divide by units outstanding at the end of the day, after the day's creations and cancellations. In an open-ended scheme there is no fixed unit count — units come into existence when money comes in.
   4. The daily accrual of expenses is the bit that trips people. A 1.8 percent TER is charged as roughly one basis point every business day, so NAV is always net of fees. There is no separate fee deduction from your folio.
   5. Rounding conventions matter in practice: liquid and debt scheme NAVs are published to four decimals, equity to two. On a liquid fund earning 6 percent a year, the fourth decimal is real money for a treasury investor.
   6. The limitation: NAV is only as honest as the valuation of the assets. For listed equity it is a closing price and beyond argument. For an unlisted or thinly traded bond it is a model or an agency price, and that is where NAV disputes live.

   Where candidates lose it

   Giving the formula and stopping. Add the accrued expense line and the moving unit count, and name the valuation weakness on illiquid debt. A candidate who says 'NAV is assets minus liabilities over units' has answered a textbook; one who says 'and that is why an illiquid debt NAV is an estimate' has answered the question.

   Expect next

   • Whose NAV is wrong if a bond in the portfolio has not traded for three weeks?
   • How often is the expense ratio charged?
   • By when must an AMC publish NAV?

   Reported by candidates at Man Group (Equity Hedge, Boston, 2019). Source: Wall Street Oasis.

9. 009Walk me through how an AMC actually strikes its NAV each evening.NAV and operationsIntermediatetechnicalFund operationsRegistrars and transfer agents

   Say this

   It is a nightly assembly line. Fund accounting pulls closing prices, applies the valuation policy to anything that does not have a clean price, books the day's trades and corporate actions, accrues income and expenses, takes the unit count from the RTA, strikes the NAV, reconciles with the custodian, gets sign-off, and uploads to AMFI and the website by 11 pm.

   Then walk it

   1. Prices first: exchange closing prices for equity, and for debt the security-level prices published by the valuation agencies, CRISIL and ICRA, which SEBI mandates the whole industry to use so two AMCs cannot carry the same bond at different values.
   2. Then trade capture. Every buy and sell done that day, at contract note level, plus any corporate action — dividend ex-date, bonus, split — has to be reflected on the right date or the NAV is wrong.
   3. Then accruals: interest income accrued on debt holdings, and the day's slice of TER, management fee, custody, RTA and audit fees.
   4. Then units. The RTA gives the day's valid purchases and redemptions after applying the cut-off rules, which sets the closing unit count. This is why the cut-off rules and the NAV are the same problem.
   5. Then reconciliation with the custodian's holding statement and the bank balance, a four-eyes review, trustee-mandated controls, and upload to the AMFI site and the AMC website by 11 pm. Fund of funds get until 10 am the next business day because they need the underlying NAVs.
   6. Where it breaks: a missed corporate action, a stale debt price, or a late bank credit that moves a large purchase to the wrong day. All three show up as an NAV restatement, which is a reportable incident to the trustee and to SEBI.

   Where candidates lose it

   Describing it as a calculation rather than a controlled process. Operations interviews at an AMC or an RTA are testing whether you know where the errors come from. Name the corporate action and the stale-price failure modes, and mention the 11 pm publication deadline — that detail says you have seen a real NAV pack.

   Expect next

   • What happens if you discover tomorrow that today's NAV was wrong?
   • Why does SEBI mandate common valuation agency prices for debt?
   • Who signs off on the NAV before it is published?
10. 010Explain the cut-off timing rules for mutual fund transactions.NAV and operationsCoretechnicalIndian AMCsFund operations

    Say this

    Three pm for everything except liquid and overnight funds, where purchase cut-off is 1:30 pm. But since February 2021 the time stamp alone does not decide anything on a purchase — you get the NAV of the day the money is actually available to the scheme for utilisation, whatever the amount.

    Then walk it

    1. Purchases in all schemes other than liquid and overnight: application received by 3 pm and funds realised by 3 pm gets the same day's NAV. Late on either leg and it is the next business day.
    2. Liquid and overnight funds: 1:30 pm for purchase, and because these schemes earn from the day of allotment, an application in by 1:30 with funds available gets the closing NAV of the previous day.
    3. Redemptions: 3 pm across the board, including liquid, and the NAV is the same day's if you are inside the cut-off.
    4. The 2021 change is the one interviewers probe. Before it, applications up to two lakh got the time-stamp NAV even if the money had not arrived. Now the realisation test applies to every rupee, which killed the practice of getting a favourable NAV on an unfunded application.
    5. Practical consequence for a distributor: a cheque or a NEFT initiated at 2:55 pm does not get you today's NAV, because it will not be credited and available for utilisation by 3. On a treasury ticket in a liquid fund, one day of NAV on 10 crore at 6 percent is about 1.6 lakh rupees.
    6. The exception to know: switches are treated as a redemption in one scheme and a purchase in the other, and the purchase leg still needs the redemption proceeds to be available, so a switch from an equity fund into a liquid fund does not get same-day liquid NAV.

    Where candidates lose it

    Quoting 3 pm and 1:30 pm and stopping. The realisation-of-funds rule is the whole modern answer, and the liquid fund previous-day NAV catches almost everyone. Say both.

    Expect next

    • An investor's money hits the scheme account at 3:10 pm. Which NAV does he get?
    • Why do liquid funds give the previous day's NAV?
    • How are switches time-stamped?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.