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. 057Explain the difference between absolute return, CAGR and XIRR, and when you would use each.Performance measurementIntermediatetechnicalIndian AMCsDistribution and sales

   Say this

   Absolute return is the total percentage gain with no reference to time, used only for periods under a year. CAGR annualises a single investment between two dates. XIRR is the internal rate of return on a series of cash flows at different dates, which is the only correct measure for an SIP.

   Then walk it

   1. Absolute: 10 lakh becomes 12 lakh, that is 20 percent. Fine for six months, misleading for five years, and quoting a five-year absolute return of 90 percent is exactly how a fact sheet flatters a mediocre fund.
   2. CAGR: the constant annual rate that takes the start value to the end value. One inflow, one outflow, one answer. Useful and comparable, and it is what SEBI mandates for period returns beyond a year.
   3. XIRR: solves for the discount rate that makes the net present value of all cash flows zero. Each SIP instalment has its own holding period, so a five-year SIP has sixty different holding periods and no single CAGR can describe it.
   4. The intuition for why the two diverge: in an SIP, most of the money has been invested for far less than the full period. A five-year SIP has an average money-weighted holding period of about two and a half years, so a 14 percent XIRR on the SIP and a 14 percent CAGR on the fund are very different achievements.
   5. In practice: a client's own return is always XIRR, because he added and withdrew money. The fund's return is always CAGR on NAV. When a client says his return is lower than the fact sheet, this is almost always why.
   6. The limitation worth naming: XIRR is money-weighted, so it reflects the investor's timing as well as the manager's skill. To judge the manager you want the time-weighted number, which is the NAV CAGR. Use XIRR to measure the investor, CAGR to measure the fund.

   Where candidates lose it

   Using CAGR on an SIP, which overstates or understates the investor's return depending on the market path, and is simply the wrong tool. The insight that wins the question is money-weighted versus time-weighted: XIRR judges the investor, CAGR judges the manager.

   Expect next

   • A client's XIRR is 9 percent and the fund's five-year CAGR is 14. Explain it to him.
   • How would you compute XIRR in a spreadsheet?
   • Which number belongs in a fact sheet?
2. 062What is portfolio turnover, and why did SEBI insist funds be benchmarked against total return indices?Performance measurementIntermediatetechnicalIndian AMCsFund research and ratings

   Say this

   Turnover is the value of securities traded in a year as a percentage of average net assets — a 100 percent turnover means the manager effectively replaced the whole portfolio once. The total return index rule, effective from February 2018, forced funds to compare themselves against an index including dividends, which removed a free 1 to 1.5 percent a year of fake outperformance.

   Then walk it

   1. What turnover tells you: holding period. Turnover of 200 percent means an average holding period of about six months, which is inconsistent with a manager who claims to buy businesses for the long term.
   2. It also costs money. Every trade pays brokerage, securities transaction tax and market impact, and none of that shows up in the TER — it just reduces NAV. High turnover in a small cap fund is expensive because impact cost is the dominant term.
   3. But high turnover is not automatically bad. It is bad when it is inconsistent with the stated process, or when it is not accompanied by outperformance. A momentum or an arbitrage strategy is supposed to have high turnover.
   4. Read it with flows. A fund receiving heavy SIP money shows turnover from deployment rather than from trading decisions, which is why you compare a fund's turnover to its own history rather than across categories.
   5. On the benchmark rule: before 2018 funds compared themselves to a price index that excluded dividends. Since Indian dividend yields run around 1 to 1.5 percent, every fund got that head start for free. SEBI's total return index mandate removed it, and large cap active outperformance visibly deteriorated overnight.
   6. The honest read of that episode is worth saying: a measurement change, not a change in skill, is what made Indian large cap active management look bad. That is a good reminder that benchmark choice is not a detail.

   Where candidates lose it

   Treating high turnover as automatically bad, or not knowing the TRI rule. The TRI change is one of the most consequential Indian regulatory events for performance comparison, and a candidate who can explain why active large cap numbers worsened after February 2018 has demonstrated real familiarity.

   Expect next

   • How would you distinguish turnover from deployment of inflows?
   • What happened to active outperformance after the TRI rule?
   • What turnover would you expect from a momentum fund?

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.