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. 019Explain the difference between actively and passively managed mutual funds.Equity schemesCoretechnicalFTFranklin TempletonRisk Management · San Mateo · 2017

   Say this

   An active fund pays a manager to pick securities and deviate from the benchmark in the hope of beating it. A passive fund replicates an index mechanically and accepts the index return minus a very small cost. The real difference is not skill — it is the cost and the dispersion of outcomes.

   Then walk it

   1. Active: a research team, security selection, sector tilts, cash calls. Expense ratio in India typically 50 to 120 basis points in a direct plan for equity, far more in a regular plan.
   2. Passive: the portfolio is the index, rebalanced when the index rebalances. Expense ratios of 2 to 20 basis points for a large cap index fund. SEBI caps index funds and ETFs at 1 percent, and competition has pushed them nowhere near the cap.
   3. The arithmetic that settles most of the debate: in aggregate, active investors hold the market, so before costs active management is a zero-sum game against other active managers. After costs it is negative-sum. That is why the median active fund underperforms.
   4. Where active still earns its fee in India is dispersion. In small and mid caps, index quality is weaker, liquidity is uneven, and the gap between the best and worst quartile manager over five years is wide. In large caps, the Nifty 50 has been hard to beat consistently since the 2018 total-return-benchmark rule closed a measurement loophole.
   5. Risk profile differs too. A passive fund guarantees you the index drawdown; an active fund adds manager risk on top of market risk, in both directions.
   6. What I would actually say to a client: index the large cap allocation, pay for active where dispersion is high and you have done manager diligence, and never pay active fees for a portfolio that is 90 percent index.

   Where candidates lose it

   Framing it as active being cleverer or passive being lazier. The examinable content is the cost arithmetic and the fact that active is zero-sum before fees. And name the Indian specific — large cap active underperformance after the TRI benchmark rule — or you are answering a global textbook question.

   Expect next

   • Would you rather run an active or a passive product, and why?
   • Why has large cap active underperformance widened in India?
   • What is a closet indexer and how would you spot one?

   Reported by candidates at Franklin Templeton (Risk Management, San Mateo, 2017). Source: Wall Street Oasis.

2. 038Explain what an ETF is and how creation and redemption works.Index funds and ETFsIntermediatetechnicalFTFranklin TempletonRisk Management · San Mateo · 2017

   Say this

   An exchange traded fund is a listed scheme that tracks an index, and its price stays near fair value because of an arbitrage loop. Authorised participants can always exchange a defined basket of the underlying securities for new ETF units with the AMC, or the reverse, so any gap between the market price and the underlying value is a trade.

   Then walk it

   1. The primary market is wholesale. An authorised participant delivers the index basket in creation-unit size to the AMC and receives ETF units, or delivers units back and receives the basket. In India SEBI has cut creation unit sizes to make this easier, and large investors above a threshold can go direct to the AMC.
   2. The secondary market is where everyone else trades, on the exchange, against other investors and against market makers.
   3. The arbitrage is the whole mechanism. If the ETF trades above the value of its basket, an AP buys the basket, creates units and sells them into the market, pushing the price down. If it trades below, it does the reverse. The loop is what keeps price anchored to value.
   4. To let that work, the AMC publishes an indicative NAV through the day — every fifteen seconds for equity ETFs — so market makers and investors can see fair value in real time.
   5. The creation-redemption design also protects existing holders. Retail selling happens between investors on the exchange and never touches the portfolio, so there is no forced selling and no dilution of the ongoing holders.
   6. Where it breaks is when the arbitrage loop fails. If the underlying market is shut or illiquid — Indian gold ETFs on a day the bullion market is disrupted, or debt ETFs in a stressed bond market — APs cannot price the basket, so premiums and discounts widen and stay wide. An ETF is only as liquid as what it holds.

   Where candidates lose it

   Describing the exchange trading and never mentioning authorised participants. The creation-redemption mechanism is the entire answer to why an ETF tracks its index, and leaving it out means you have described a listed closed-end fund. Then name a case where the arbitrage fails — that is the risk management version of the answer.

   Expect next

   • What is iNAV, and how often must it be published?
   • What happens when the underlying market is closed?
   • Who bears the cost of an ETF's premium or discount?

   Reported by candidates at Franklin Templeton (Risk Management, San Mateo, 2017). Source: Wall Street Oasis.

3. 092What is your investment philosophy, and what experiences led you to it?Career and fitIntermediatesuperdayFTFranklin TempletonEquity Research · San Mateo · 2024

   Say this

   State something narrow enough to exclude things, then tie it to a specific experience, ideally one where you lost money. A philosophy that rules nothing out is not a philosophy, and interviewers use this question to find out whether you have actually invested or only studied.

   Then walk it

   1. Pick a lane and say it plainly. Quality businesses with returns above the cost of capital at sensible prices. Cyclicals at the point of maximum pessimism. Underfollowed small caps where the research gap is the edge. Any of these works; 'I look for good companies at undervalued prices' does not, because nobody looks for the opposite.
   2. Then the formative experience, concrete and dated. What you bought, what you believed, what happened, what changed in your process.
   3. Losses teach better than wins and interviewers know it. Something like: I bought a cheap Indian textile company on a five times multiple and learned that a declining business gets cheaper faster than the thesis can play out. That is why I now insist on returns on capital, not just a low multiple.
   4. Then connect it to the seat you are in. A long-only mutual fund with a five-year horizon rewards a durability philosophy. A fixed income seat rewards a philosophy about credit selection and liquidity rather than about compounding.
   5. Include one thing you deliberately do not do, because that is what makes it real. 'I do not take positions I cannot explain in two sentences' or 'I do not size anything above 5 percent' are constraints, and constraints are evidence of a process.
   6. Keep the personal portfolio detail modest and specific. Interviewers want proof of skin in the game and a repeatable method, not a performance claim.

   Where candidates lose it

   A philosophy broad enough to be universal, or one that contradicts the firm you are sitting in. Read what they run before you answer. And if you have never actually invested money, say so and describe the process you have built instead — inventing a track record does not survive two follow-ups.

   Expect next

   • Tell me about a position you lost money on.
   • How has your philosophy changed in the last two years?
   • Does that philosophy fit what we run here?

   Reported by candidates at Franklin Templeton (Equity Research, San Mateo, 2024). Source: Wall Street Oasis.

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.