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?
4. 009Walk me through how an AMC actually strikes its NAV each evening.NAV and operationsIntermediatetechnicalFund operationsRegistrars and transfer agents

   Say this

   It is a nightly assembly line. Fund accounting pulls closing prices, applies the valuation policy to anything that does not have a clean price, books the day's trades and corporate actions, accrues income and expenses, takes the unit count from the RTA, strikes the NAV, reconciles with the custodian, gets sign-off, and uploads to AMFI and the website by 11 pm.

   Then walk it

   1. Prices first: exchange closing prices for equity, and for debt the security-level prices published by the valuation agencies, CRISIL and ICRA, which SEBI mandates the whole industry to use so two AMCs cannot carry the same bond at different values.
   2. Then trade capture. Every buy and sell done that day, at contract note level, plus any corporate action — dividend ex-date, bonus, split — has to be reflected on the right date or the NAV is wrong.
   3. Then accruals: interest income accrued on debt holdings, and the day's slice of TER, management fee, custody, RTA and audit fees.
   4. Then units. The RTA gives the day's valid purchases and redemptions after applying the cut-off rules, which sets the closing unit count. This is why the cut-off rules and the NAV are the same problem.
   5. Then reconciliation with the custodian's holding statement and the bank balance, a four-eyes review, trustee-mandated controls, and upload to the AMFI site and the AMC website by 11 pm. Fund of funds get until 10 am the next business day because they need the underlying NAVs.
   6. Where it breaks: a missed corporate action, a stale debt price, or a late bank credit that moves a large purchase to the wrong day. All three show up as an NAV restatement, which is a reportable incident to the trustee and to SEBI.

   Where candidates lose it

   Describing it as a calculation rather than a controlled process. Operations interviews at an AMC or an RTA are testing whether you know where the errors come from. Name the corporate action and the stale-price failure modes, and mention the 11 pm publication deadline — that detail says you have seen a real NAV pack.

   Expect next

   • What happens if you discover tomorrow that today's NAV was wrong?
   • Why does SEBI mandate common valuation agency prices for debt?
   • Who signs off on the NAV before it is published?
5. 014Why did SEBI rationalise mutual fund scheme categories in 2017, and what actually changed?Scheme categorisationIntermediatetechnicalIndian AMCsProduct and strategy roles

   Say this

   Because AMCs were running dozens of near-identical schemes with different names and no comparable definitions, so an investor could not tell two large cap funds apart. The October 2017 circular defined five groups and a fixed set of categories with hard asset allocation rules, and restricted each AMC to one scheme per category.

   Then walk it

   1. The problem it solved: a fund house might run eight equity schemes that all owned the same 40 large caps, sold as eight different ideas, mostly to keep NFO commissions flowing. Comparison across AMCs was impossible.
   2. Five groups: equity, debt, hybrid, solution-oriented, and other, which is index funds, ETFs and fund of funds. Inside them SEBI prescribed the categories — ten on the equity side, sixteen on debt, six hybrid, two solution-oriented.
   3. Each category got a binding definition. A large cap fund must hold at least 80 percent large caps. A mid cap fund at least 65 percent mid caps. A focused fund no more than 30 stocks. The definition is not marketing, it is in the SID.
   4. One scheme per category per AMC, with carve-outs for index funds and ETFs tracking different indices, fund of funds with different underlying, and sectoral or thematic funds, because each sector is genuinely a different product.
   5. AMCs complied by merging and renaming, and there were real casualties: schemes with long track records were merged into others, which reset the comparable history investors had relied on.
   6. The honest critique: it made categories comparable but pushed differentiation into the sectoral and thematic bucket, where there is no one-scheme limit. That is why the NFO pipeline today is mostly thematic funds and passive launches.

   Where candidates lose it

   Describing it as 'SEBI reduced the number of schemes'. It did not cap the count — it defined the categories and restricted duplication within a category. And know the exceptions, because the follow-up is always whether an AMC can launch two index funds.

   Expect next

   • Can one AMC run two large cap funds?
   • Which categories are exempt from the one-scheme rule?
   • Has it actually made comparison easier?
6. 016What is the difference between a multi cap and a flexi cap fund, and why does the flexi cap category exist at all?Scheme categorisationIntermediatetechnicalIndian AMCsProduct and strategy roles

   Say this

   A multi cap fund must hold at least 25 percent each in large, mid and small caps. A flexi cap fund has no such split — just 65 percent in equity, allocated wherever the manager wants. Flexi cap exists because SEBI created it in late 2020 as an escape hatch after it forced the 25-25-25 rule on multi caps.

   Then walk it

   1. Before September 2020, multi cap meant 65 percent equity and full discretion. In practice most multi cap funds were 75 to 80 percent large cap, which SEBI thought was mis-selling a diversified product.
   2. SEBI's fix imposed a minimum 25 percent in each of large, mid and small, taking the equity minimum to 75 percent. That would have forced tens of thousands of crores into small caps on a deadline.
   3. The industry pushed back on the liquidity impact, and within two months SEBI created flexi cap: 65 percent equity, no cap-bucket constraint. Most large multi cap funds immediately converted to flexi cap and kept doing what they were doing.
   4. So today the two categories are genuinely different products. Multi cap is a structurally higher-risk, rules-based allocation with mandatory small cap exposure. Flexi cap is a manager-discretion mandate that in practice behaves like a large cap fund with a tail.
   5. When recommending, that distinction is the whole point. If a client wants a single equity fund and is comfortable with volatility, multi cap gives forced small cap exposure they would otherwise never rebalance into. If they want the manager to de-risk in expensive markets, flexi cap allows it.
   6. The honest caveat: flexi cap's flexibility is only useful if the manager uses it, and most do not move cap allocation much. Check the last three years of portfolio disclosures before you believe the label.

   Where candidates lose it

   Saying they are the same thing, or getting the direction of the constraint backwards. Multi cap is the constrained one, despite sounding more flexible. And knowing the 2020 sequence — the 25-25-25 rule, then flexi cap two months later — is what shows you follow the regulator rather than a coaching sheet.

   Expect next

   • Which of the two would you expect to be more volatile, and by how much?
   • Why did SEBI back down so quickly?
   • How would you check whether a flexi cap manager actually flexes?
7. 018Walk me through the equity scheme categories SEBI permits.Equity schemesIntermediatetechnicalIndian AMCsProduct and strategy roles

   Say this

   Eleven, once you count flexi cap. Large cap, large and mid cap, mid cap, small cap, multi cap, flexi cap, dividend yield, value, contra, focused, sectoral or thematic, plus ELSS as the tax-linked one. Each carries a minimum equity allocation and most carry a cap-bucket rule.

   Then walk it

   1. Cap-based: large cap 80 percent in the top 100, mid cap 65 percent in 101 to 250, small cap 65 percent in 251 plus, large and mid cap at least 35 percent in each, multi cap 25 percent in each of the three, flexi cap 65 percent equity with free choice.
   2. Style-based: value and contra both need 65 percent equity, and crucially an AMC may run one or the other, not both, because SEBI treats them as the same product sold two ways. Dividend yield needs 65 percent equity predominantly in dividend-yielding stocks.
   3. Concentration: focused funds hold a maximum of 30 stocks with 65 percent equity. That cap is the product.
   4. Sectoral and thematic: 80 percent in the stated sector or theme, and this is the one category where an AMC can run many schemes, which is why it is where the launch activity is.
   5. ELSS: 80 percent equity, three-year lock-in per instalment, eligible under section 80C for investors who are still in the old tax regime.
   6. What the list does not give you is a risk ranking. A thematic fund at 80 percent in one sector is riskier than a small cap fund on concentration but may be less volatile on drawdown. The category tells you the constraint, not the risk — that is what the risk-o-meter is for.

   Where candidates lose it

   Reeling off names with no numbers. The interviewer is checking the minimum allocations, because those are the constraints you would have to monitor in a real job. If you only remember three, remember large cap 80, mid and small cap 65, focused 30 stocks.

   Expect next

   • Can an AMC run both a value fund and a contra fund?
   • Which of these categories would you expect to have the highest tracking error to the Nifty?
   • Where does an equity savings fund sit?
8. 020What is an ELSS, and how does the lock-in interact with an SIP?Equity schemesIntermediatetechnicalIndian AMCsDistribution and sales

   Say this

   An equity linked savings scheme is an equity fund with at least 80 percent in equity and a three-year lock-in, eligible for a section 80C deduction of up to 1.5 lakh for investors on the old tax regime. With an SIP, the three years run separately from each instalment, not from the start of the SIP.

   Then walk it

   1. Three years is the shortest lock-in among 80C options — PPF is fifteen, NSC is five, a tax-saving fixed deposit is five — and it is the only one with full equity exposure.
   2. The SIP mechanic is the examinable bit. A January instalment unlocks the following January three years later. A 36-month SIP is therefore fully liquid only after 72 months from the first instalment, and redemption follows first-in first-out.
   3. Lock-in also means the manager cannot be forced to sell. That is a genuine structural advantage: an ELSS never faces a redemption wave in a crash, so it can stay invested where an open-ended fund is selling.
   4. Taxation on exit is normal equity taxation, long-term by definition because of the lock-in: 12.5 percent above the 1.25 lakh annual exemption on equity gains.
   5. The commercial reality has shifted. Under the new tax regime, which most new taxpayers default to, there is no 80C deduction, so the entire case for ELSS collapses and net flows into the category have gone flat to negative.
   6. So the honest advice today: if a client is on the new regime, ELSS is just a flexi cap fund with an unnecessary lock-in. Do not sell the lock-in as discipline when a plain equity fund does the same job with liquidity.

   Where candidates lose it

   Saying the whole SIP unlocks three years after it starts. It is per instalment, and a distributor who gets this wrong creates a furious client at the worst possible moment. Second trap: pitching ELSS to someone on the new tax regime, which is now most new investors.

   Expect next

   • A client has run an ELSS SIP for four years. How much can he redeem today?
   • Does the lock-in help or hurt the fund manager?
   • Is ELSS still worth selling under the new tax regime?
9. 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.

10. 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.

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.