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. 024What is yield to maturity?Debt schemesIntermediatetechnicalPIMCOFixed Income · Sydney · 2025

   Say this

   The single discount rate that makes the present value of all a bond's future cash flows equal its current market price. It is the internal rate of return you earn if you buy at that price, hold to maturity, collect every coupon, and reinvest each coupon at that same yield.

   Then walk it

   1. It solves price for yield. Price is observable, the cash flows are contractual, so YTM is what falls out — which is why you can compare a five-year and a ten-year bond on one number.
   2. Price and yield move inversely. If yields rise, the fixed coupons are worth less, so the price falls. How much it falls is duration.
   3. The three assumptions people skip: you hold to maturity, the issuer does not default, and every coupon is reinvested at the YTM. The reinvestment assumption is the one that breaks in the real world — a falling rate environment means you reinvest coupons at less than the YTM and realise less than it promised.
   4. In a mutual fund context, the portfolio YTM on a fact sheet is a weighted average of the holdings' yields, gross of the expense ratio. So the number you actually earn is roughly portfolio YTM minus TER, assuming nothing defaults and the manager does not trade.
   5. And a high portfolio YTM is not a good thing by itself. A debt fund quoting 9 percent when the equivalent gilt is at 7 is telling you it holds credit risk or long duration. Read the yield alongside the rating profile and the Macaulay duration or it is meaningless.
   6. For a callable or a puttable bond you would use yield to call or yield to worst instead, because maturity is no longer the binding date.

   Where candidates lose it

   Defining YTM as the coupon rate or as the current yield. Current yield is coupon over price and ignores capital gain to maturity. Also, the reinvestment assumption is the part that separates a memorised definition from an understood one — say it before you are asked.

   Expect next

   • What if the coupons cannot be reinvested at that rate?
   • A debt fund's fact sheet shows a 9 percent YTM. What do you check next?
   • How does YTM differ from current yield and from yield to call?

   Reported by candidates at PIMCO (Fixed Income, Sydney, 2025). Source: Wall Street Oasis.

2. 025How would you price a bond in today's market?Debt schemesIntermediatetechnicalJ.P. MorganGeneralist · Columbus · 2026

   Say this

   Discount every cash flow — the coupons and the principal — at a rate built from the risk-free curve for that maturity plus a credit spread for the issuer. Price is the sum of those present values. In practice you take the government security yield at the same tenor and add the spread the market is paying for that rating.

   Then walk it

   1. Mechanically: price equals the sum of coupon divided by one plus y to the power t, for each period, plus the face value discounted at the final period. A ten-year annual bond has eleven cash flows.
   2. The discount rate is the part that requires judgement. Start with the G-sec yield for the same tenor — in India, the ten-year benchmark. Add a spread: a few basis points for a AAA PSU, substantially more for a AA corporate, and far more for anything below.
   3. Rule of thumb for the intuition: if the coupon exceeds the market yield the bond trades above par, if it is below it trades at a discount, and at par the two are equal. State that and you have shown you understand the mechanism rather than the formula.
   4. Then the adjustments. Accrued interest, so quote clean or dirty price and say which. Embedded options, so use yield to call if it is callable. Liquidity, because an Indian corporate bond that trades twice a month carries a real illiquidity premium over its matrix price.
   5. For a mutual fund this is not a free choice. SEBI requires debt to be valued at the security-level prices published by CRISIL and ICRA, averaged, precisely so two AMCs cannot mark the same bond differently. Your own model is a cross-check, not the NAV.
   6. Sanity check the answer with duration. If the ten-year yield moves 50 basis points and a bond with modified duration of 7 does not move about 3.5 percent, you have made an arithmetic error.

   Where candidates lose it

   Reaching for the formula and skipping how you pick the discount rate. The whole question is the discount rate. In an AMC seat, add the point that regulated valuation overrides your model — that is the answer a fund accounting or risk interviewer is waiting for.

   Expect next

   • Where do you get the credit spread from?
   • Now tell me what happens to the price if rates move 50 basis points.
   • How would you price it if the bond has not traded in a month?

   Reported by candidates at J.P. Morgan (Generalist, Columbus, 2026). Source: Wall Street Oasis.

3. 028A corporate treasurer has 40 crore of surplus he will need in about 45 days. Overnight fund, liquid fund or money market fund?Debt schemesIntermediatecase studyCorporate treasury desksIndian AMCs

   Say this

   Liquid fund, for a 45-day horizon. Overnight gives up yield for liquidity he does not need, and a money market fund holds paper out to a year, so it carries mark-to-market risk over a window this short. Liquid caps residual maturity at 91 days, which roughly matches the horizon.

   Then walk it

   1. Overnight funds hold one-day paper, so there is effectively no rate risk and no credit risk, but the yield is the lowest of the three. That is the right answer for money he might need tomorrow, not in 45 days.
   2. Liquid funds hold paper up to 91 days residual maturity. Since the move to full mark to market the NAV does move, but with average maturity under about 60 days the sensitivity is small — a 25 basis point move costs a few basis points of NAV.
   3. Money market funds can hold up to one year. That extra duration earns maybe 20 to 40 basis points more in a normal curve, but over 45 days a rate spike can wipe out more than the extra carry.
   4. Watch the graded exit load on liquid funds for redemptions inside seven days, introduced after the 2019 stress. Redeeming on day 3 costs a small penalty; by day 45 it is irrelevant. Say this, because treasurers ask.
   5. Then the operational detail that actually matters to a treasurer: the 1:30 pm purchase cut-off and the realisation rule. Funding by RTGS in the morning gets him the previous day's NAV; a 2 pm transfer loses a day, which on 40 crore at 6 percent is about 66,000 rupees.
   6. One check before recommending: the scheme's top-10 investor concentration. A liquid fund where three corporates hold 60 percent of AUM is a fund where someone else's quarter-end redemption becomes his problem.

   Where candidates lose it

   Answering with the highest-yielding option. Treasury money is about certainty of principal on a known date, not yield. And if you do not mention the 1:30 pm cut-off and the seven-day exit load, an institutional sales interviewer will conclude you have never spoken to a treasurer.

   Expect next

   • Now he says he might need it on any day with 24 hours' notice. What changes?
   • What is the exit load structure on a liquid fund?
   • How would you check the fund's investor concentration?
4. 030Explain the risk-o-meter and how it is computed.Risk, liquidity and disclosureIntermediatetechnicalIndian AMCsRisk and compliance

   Say this

   A six-level risk label on every scheme — low, low to moderate, moderate, moderately high, high and very high — computed from the actual portfolio each month, not from the category. Since January 2021 it must be published within ten days of month end and any change has to be communicated to every unitholder.

   Then walk it

   1. For debt schemes it averages three scores: credit risk from the ratings of the holdings, interest rate risk from Macaulay duration, and liquidity risk from listing status, rating and structure. The average maps to one of the six levels.
   2. For equity schemes the three inputs are market capitalisation, volatility and impact cost as the liquidity measure. For derivatives and commodities there are separate prescribed treatments.
   3. The key design choice is that it is portfolio-based and monthly. The pre-2021 version was a category label that never moved. Now, if a manager buys weaker credit, the meter moves and every unitholder must be told.
   4. That disclosure requirement is what gives it teeth. A change in the risk-o-meter is a visible, dated event, and it creates real commercial pressure on a manager who quietly drifts up the risk curve.
   5. In practice almost every equity fund lands on very high, because the scale compresses at the top. So it is useful for comparing debt schemes and nearly useless for choosing between two equity funds.
   6. The other limitation: it is backward-looking by one month and says nothing about concentration or about how much the fund could lose. Use it as a screen and as a mis-selling defence, and use the portfolio and the stress test data for the real work.

   Where candidates lose it

   Saying the risk-o-meter is based on the scheme category. That was the old system and SEBI replaced it precisely because it was static. The second trap is overselling it — acknowledge that it barely differentiates equity funds.

   Expect next

   • How does it differ from the Potential Risk Class matrix?
   • What must the AMC do when a scheme's risk-o-meter changes?
   • Why does almost every equity fund show very high risk?
5. 035A client calls, angry. His debt fund's NAV has fallen and he was told debt funds are safe. What do you say?Risk, liquidity and disclosureIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   Establish which of the two causes it is before saying anything reassuring. If it is rates, the loss reverses over time and the fund's yield has actually improved. If it is a credit write-down, the loss is permanent and the conversation is completely different. Never blend them.

   Then walk it

   1. Diagnose first: check whether the fall is broad across the category and matches a move in bond yields, or whether it is a single-day drop specific to this scheme, which almost always means a downgrade or a default.
   2. If it is rates, explain the mechanism in his language. Bond prices fall when yields rise. A fund with a modified duration of 3 loses about 3 percent when yields move up a percentage point, and it earns that back through higher accrual over roughly the duration period if he stays.
   3. If it is credit, say so plainly, tell him whether a segregated portfolio has been created, what the written-down value is, and that the recovery timeline is not in the AMC's control. Do not describe a permanent loss as temporary volatility.
   4. Then the honest part about the original advice. Debt funds are lower risk than equity, not risk-free. Since the move to full mark to market, even liquid fund NAVs move. If he was sold 'safe', he was sold badly, and admitting that protects the relationship better than defending it.
   5. Then match the product to the horizon properly. Money needed within a year belongs in liquid or money market. One to three years in short duration. Anything with duration or credit exposure requires the ability to sit through a drawdown.
   6. And a number to anchor it: over the last two decades, a short duration fund's worst twelve-month period has been a small negative, while the same period in an equity fund has been minus 40 percent. The relative claim is defensible; the absolute one never was.

   Where candidates lose it

   Reassuring first and diagnosing later. If the fall is a default and you have told him it will recover, you have destroyed your credibility and possibly created a compliance issue. Diagnose, then explain, then fix the product fit.

   Expect next

   • How would you explain duration to a 70-year-old client?
   • What if a segregated portfolio has been created?
   • How should he have been positioned in the first place?
6. 036What do the stress test disclosures for mid and small cap funds tell you?Risk, liquidity and disclosureIntermediatetechnicalIndian AMCsRisk and compliance

   Say this

   They tell you how many days the fund would need to liquidate 25 percent and 50 percent of its portfolio pro rata in normal market conditions. AMFI made this a monthly disclosure from March 2024, after SEBI got worried about froth and flows in small caps.

   Then walk it

   1. The calculation excludes the least liquid 20 percent of the portfolio and uses recent traded volumes, then asks how many trading days it would take to sell a quarter and a half of the rest without dominating the market.
   2. The results were eye-opening. Some large small cap funds showed more than 20 trading days to liquidate half the portfolio, and a month is not a reassuring number for an open-ended daily-dealing fund.
   3. The disclosure comes with four other numbers worth as much: portfolio valuation on a price-to-earnings basis against the benchmark, volatility, the share of large caps and cash held as a liquidity cushion, and the top-10 investor concentration.
   4. What to do with it is comparative. Two small cap funds of similar size with liquidation times of 8 days and 28 days are running very different risks for the same headline category and a similar expense ratio.
   5. It also explains manager behaviour you would otherwise find odd: small cap funds soft-closing lump sum inflows, or capping SIP amounts. That is a manager who has read his own stress test and decided the next 5,000 crore cannot be deployed responsibly.
   6. The limitation to state: it assumes normal volumes. In a real drawdown the volumes that make the calculation work are precisely what disappears, so treat the published number as a best case and roughly double it in your head.

   Where candidates lose it

   Not knowing this exists. It is the most India-specific risk disclosure in the industry and a favourite question at AMCs in 2025 and 2026. The second trap is quoting the number as though it holds in a crisis — it is computed on normal-market volumes.

   Expect next

   • Why did SEBI ask for this in March 2024 specifically?
   • What does it mean when a small cap fund stops accepting lump sums?
   • Would you trust the number in a falling market?
7. 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.

8. 043Walk me through the hybrid categories, and tell me what a balanced advantage fund actually does.Hybrid and solution schemesIntermediatetechnicalIndian AMCsProduct and strategy roles

   Say this

   Six categories: conservative hybrid, balanced hybrid, aggressive hybrid, dynamic asset allocation or balanced advantage, multi asset allocation, and arbitrage, with equity savings sitting alongside. A balanced advantage fund is the one with no fixed allocation — it can run zero to a hundred percent equity, usually driven by a valuation model.

   Then walk it

   1. The allocation grid: conservative hybrid 10 to 25 percent equity, balanced hybrid 40 to 60 with no arbitrage allowed, aggressive hybrid 65 to 80 percent equity with 20 to 35 in debt, multi asset in at least three asset classes with a minimum 10 percent in each, arbitrage at least 65 percent in equity for hedged positions.
   2. Aggressive hybrid is the volume category, and the reason is tax: at 65 percent equity it qualifies as an equity-oriented fund, so it gets equity taxation while running a third of the book in bonds.
   3. Balanced advantage funds use a model — usually price to earnings, price to book, or a yield gap between equities and bonds — to set net equity mechanically, and they hedge the rest with derivatives so gross equity stays above 65 percent for tax purposes.
   4. That last point is the real answer to what a BAF does. Net equity might be 40 percent while gross equity is 70, because the difference is hedged. The investor gets a lower-volatility equity experience with equity taxation.
   5. Where they earn their keep is behaviour. The fund de-risks at expensive valuations without the investor having to make the decision, and it rebalances without triggering a taxable event for the investor.
   6. The honest critiques: the models are opaque and differ wildly between AMCs, so two balanced advantage funds can have net equity of 35 and 75 at the same moment. And in a long bull market they structurally lag a plain equity fund. Sell them as volatility management, never as a return enhancer.

   Where candidates lose it

   Describing aggressive hybrid as a moderate-risk product and stopping. The 65 percent floor exists because of the tax definition, not because of risk science — saying that shows you understand why the category is shaped as it is. On BAFs, if you cannot distinguish gross from net equity you have missed the product.

   Expect next

   • Why is 65 percent the magic number?
   • How would you compare two balanced advantage funds?
   • Where does an equity savings fund sit in this list?
9. 045What are solution-oriented schemes, and are retirement and children's funds worth recommending?Hybrid and solution schemesIntermediatetechnicalIndian AMCsDistribution and sales

   Say this

   Two categories SEBI created in 2017: retirement funds and children's funds, each with a five-year lock-in or until the goal, whichever is earlier. Structurally they are ordinary hybrid or equity funds with a lock-in and a label, and in most cases I would not recommend them over a plain equity fund plus discipline.

   Then walk it

   1. The mandate: a retirement fund locks money in for five years or until retirement age, a children's fund until the child turns eighteen, whichever comes first.
   2. What you get: the lock-in removes the investor's ability to panic-sell, and it lets the manager stay fully invested through a drawdown without redemption pressure. Those are genuine, if modest, advantages.
   3. What you give up: liquidity, and the ability to change manager. If the fund underperforms for three years you are stuck, which is the opposite of what good practice demands.
   4. There is no tax advantage. Unlike the National Pension System, which carries its own deduction, a retirement mutual fund gets no special treatment. Some schemes were notified under 80C historically, but for most investors today there is nothing.
   5. And the label does nothing for asset allocation. A retirement fund does not glide down its equity exposure as the investor ages unless the SID says it does, and most do not. The name implies a lifecycle product that the mandate does not deliver.
   6. So my recommendation: use a flexi cap or an index fund for the retirement corpus with an explicit written allocation plan, and reserve the solution-oriented category for a client who has demonstrated that he will redeem at the first 20 percent drawdown. For him, the lock-in is worth the cost.

   Where candidates lose it

   Assuming a retirement fund is a target-date or lifecycle product. In India it almost never is. The other trap is implying a tax benefit — there generally is not one, and claiming otherwise in a distribution role is mis-selling.

   Expect next

   • How does this compare with the National Pension System?
   • Does the equity allocation glide down as the investor ages?
   • When would the lock-in actually help an investor?
10. 049How does a mutual fund distributor actually get paid, and why did SEBI ban upfront commission?Costs, plans and commissionsIntermediatetechnicalDistribution and salesIndian AMCs

    Say this

    Trail only, since October 2018. The AMC pays a percentage of the assets the distributor has brought in, every year, out of the scheme's expense ratio. Upfront commission was banned because it paid the distributor for the transaction rather than for the holding, and that produced churn.

    Then walk it

    1. How trail works: typically 0.5 to 1.2 percent a year on equity assets, paid monthly or quarterly on live AUM under the distributor's ARN. Stop servicing the client and the money keeps coming as long as the units stay.
    2. The old model paid 1 to 2 percent upfront on a new sale, sometimes more on close-ended NFOs. The incentive was obvious: move the client into a new scheme every year and get paid again. The client paid the exit load and the capital gains tax.
    3. SEBI's response was to move the whole industry to full trail, ban upfront, and require that every rupee of commission come out of the scheme rather than from the AMC's own books, so nothing is hidden. It also stopped AMCs from paying for distributor travel and events.
    4. One carve-out survives: for genuinely first-time investors, a limited upfronting of trail on small SIPs is permitted, because the economics of servicing a 500 rupee SIP otherwise do not work.
    5. There is an additional permitted charge for inflows from beyond the top 30 cities, which is the industry's geographic expansion subsidy, tightened repeatedly after it was gamed.
    6. The honest result: churn fell sharply and distributor economics shifted from hunting to farming, which is better for investors. But trail also pays for doing nothing, and it scales with the corpus rather than with the work — which is the structural argument for fee-only advice.

    Where candidates lose it

    Not knowing the 2018 date or claiming upfront commission still exists. Also, EUIN matters here: the employee's unique identification number must be on the form so the individual who advised is traceable. If you are interviewing for a distribution role, know what ARN and EUIN are.

    Expect next

    • What is an ARN and what is an EUIN?
    • How did churn actually change after 2018?
    • Is trail commission a fair way to pay for advice?

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.