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. 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?
2. 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?
3. 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?

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.