Mutual Fund Mastery interview preparation

Indian AMCs, distributors, registrars and the global fund houses that hire for the same skills — covering the trust structure, NAV and cut-off rules, SEBI scheme categorisation, debt risk and the Potential Risk Class matrix, passives, costs, taxation and distribution. Every question is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it; we do not invent attributions.

Jump to the question bank

Question bank

100 questions, mapped to the firms that asked them

Questions: 100
Traced to a firm: 32
Firms: 19
Updated: September 2026

Showing 1–1 of 1 · filtered from 100Clear filters

038Explain what an ETF is and how creation and redemption works.Index funds and ETFsIntermediatetechnicalFranklin 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.

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.

100 questions, mapped to the firms that asked them

Say this

Then walk it

Where candidates lose it

Expect next