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. 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?
2. 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?
3. 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?

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.