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.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 32
- Firms
- 19
- Updated
- September 2026
019Explain the difference between actively and passively managed mutual funds.Franklin 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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
038Explain what an ETF is and how creation and redemption works.Franklin 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
- 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.
- The secondary market is where everyone else trades, on the exchange, against other investors and against market makers.
- 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.
- 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.
- 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.
- 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.