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. 046What is the total expense ratio and what sits inside it?Costs, plans and commissionsCorephone / first roundIndian AMCsDistribution and sales

   Say this

   The TER is every recurring cost the scheme charges its unitholders, expressed as a percentage of daily net assets, and it is accrued daily so the NAV you see is already net of it. It includes the management fee, distributor commission in a regular plan, RTA and custody fees, audit, marketing and GST on the management fee.

   Then walk it

   1. Line items: investment management and advisory fee, trustee fee, registrar and transfer agent charges, custodian fees, audit fees, marketing and selling expenses including distributor commission, listing fees where applicable, and GST on the management fee.
   2. It is charged daily, roughly one basis point a day for a 2 percent TER, which is why there is never a separate fee debit in your account statement.
   3. What is outside it and therefore additional: brokerage and transaction costs on securities trades, up to a small permitted limit, and securities transaction tax. Those reduce NAV without appearing in the TER number.
   4. Exit load is also outside the TER, and since 2012 the exit load collected goes into the scheme, not to the AMC. So it is a transfer between investors, not a cost to the fund.
   5. The one number that matters in practice is the difference between the direct and regular plan of the same scheme, because that gap is almost entirely distributor commission. In Indian equity funds it is commonly 50 to 120 basis points.
   6. The reason to care: 1 percent a year compounds to roughly 20 percent of the final corpus over 25 years. That is not a rounding error, it is the difference between retiring on 1 crore and on 80 lakh.

   Where candidates lose it

   Not knowing that brokerage and STT sit outside the TER, or that exit load goes to the scheme rather than the AMC. Both are standard follow-ups. And always convert the percentage into a compounded rupee figure — a candidate who can quantify the drag sounds like someone who has advised a client.

   Expect next

   • What is excluded from the TER?
   • Who keeps the exit load?
   • How much does 1 percent cost over 25 years?
2. 047Walk me through SEBI's TER slabs and why they are structured that way.Costs, plans and commissionsHardtechnicalIndian AMCsProduct and strategy roles

   Say this

   The cap falls as the scheme's assets grow. For open-ended equity schemes it starts at 2.25 percent on the first 500 crore and steps down through the slabs to about 1.05 percent once assets exceed 50,000 crore. Debt schemes get a cap 25 basis points lower at each slab, and index funds and ETFs are capped at 1 percent.

   Then walk it

   1. Equity slabs, in shape: 2.25 percent on the first 500 crore, 2.00 on the next 250, 1.75 on the next 1,250, then 1.60, then 1.50, then a taper of 5 basis points for every additional 5,000 crore, with a floor around 1.05 percent above 50,000 crore.
   2. The logic is scale economies. Running a 40,000 crore fund does not cost twenty times what a 2,000 crore fund costs, so SEBI forces the saving to be passed to unitholders instead of kept as margin.
   3. It is a marginal-slab cap, applied on assets in each band, not a single rate on the whole AUM. Candidates get this wrong constantly. A 2,000 crore equity fund's blended cap works out well below 2.25 percent.
   4. Passive is capped separately and far lower, at 1 percent for index funds and ETFs, and competition has driven actual charges to 2 to 20 basis points. Fund of funds have their own caps.
   5. There is also a permitted additional charge for inflows sourced from beyond the top 30 cities, subject to conditions, designed to pay for distribution reach into smaller towns. It has been repeatedly tightened because it was gamed by routing city money through upcountry ARNs.
   6. The honest assessment of the whole regime: it has compressed headline costs, but it also means an AMC's economics improve with size, which is why the industry consolidates and why the largest fund houses fight so hard for scale. Regulation set the price; competition in passive is what is now actually moving it.

   Where candidates lose it

   Quoting 2.25 percent as if it applies to the whole AUM. It is a marginal slab structure. If you cannot remember every number, say the shape — starts around 2.25, steps down with size, floor around 1.05, passive capped at 1 — and you will sound better than someone who recites four numbers wrongly.

   Expect next

   • What is the blended cap for a 3,000 crore equity fund?
   • What is the additional TER for inflows from smaller cities?
   • Why are passive funds capped separately?
3. 048What is the difference between a direct and a regular plan, and how big is the gap over twenty years?Costs, plans and commissionsCorephone / first roundIndian AMCsDistribution and sales

   Say this

   Same portfolio, same fund manager, same scheme — the only difference is that a regular plan pays distributor commission out of the scheme and a direct plan does not. In Indian equity funds the gap is typically 50 to 120 basis points a year, and over twenty years that compounds to roughly 15 to 20 percent of the final corpus.

   Then walk it

   1. Both plans have been mandatory since January 2013 and carry separate NAVs. The direct plan's NAV is always higher for the same scheme launched on the same day, and the divergence widens every year.
   2. Put numbers on it: a 20,000 rupee monthly SIP for twenty years at 12 percent gross builds about 1.83 crore. Take 1 percent more in fees and you land closer to 1.62 crore. That 21 lakh is the commission, compounded.
   3. The distributor's defence is that they earn it — goal setting, asset allocation, keeping the client invested in a crash. For many investors that is genuinely worth more than 1 percent, because the behavioural mistake costs far more than the fee.
   4. The counter is that the commission is paid whether or not any advice happens, it is invisible in the NAV, and it is paid on the whole corpus every year rather than on the advice given once.
   5. Practical route for a direct investor: the AMC's own site or app, the MF Central and RTA platforms, or a flat-fee registered investment adviser who recommends direct plans and charges separately — which is the cleanest structure, because the cost is visible and the incentive is not tied to the product.
   6. How I would answer it in an AMC interview: state the arithmetic honestly, then say the choice is between paying for behaviour management inside the product or buying it separately at a visible price.

   Where candidates lose it

   Either trashing regular plans or defending commissions reflexively. Both signal a script. Give the compounded rupee number, then concede the behavioural value of a good distributor. That balance is what a distribution-side interviewer is actually listening for.

   Expect next

   • If direct is cheaper, why do most investors still hold regular plans?
   • What is the RIA model and how is it different?
   • Can an investor switch from regular to direct without tax?
4. 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?
5. 050How do exit loads work, who keeps the money, and are they part of the expense ratio?Costs, plans and commissionsIntermediatetechnicalIndian AMCsFund operations

   Say this

   An exit load is a percentage deducted from the redemption value if you leave within a stated period, typically 1 percent within a year for an equity fund. It goes into the scheme, not to the AMC, and it is not part of the TER. Entry loads have been banned in India since August 2009.

   Then walk it

   1. Mechanics: the load applies to the units being redeemed, on a first-in first-out basis, and GST is charged on it. The SID sets the structure and the AMC cannot vary it for individual investors.
   2. Since 2012 exit load proceeds are credited to the scheme, so remaining unitholders benefit. That changes what it is — not a fee, but a transfer from the departing investor to the ones staying.
   3. The purpose is to make short-term money pay its own dealing costs. When you redeem, the manager sells securities and the fund pays brokerage and impact; the load offsets that so long-term holders are not diluted.
   4. Typical structures: 1 percent within 12 months for equity funds, nothing thereafter. A graded scale of a few basis points for liquid funds redeemed inside seven days, introduced after 2019. Nil on overnight funds. ELSS has none because the lock-in does the job.
   5. It stacks with tax. Redeeming an equity fund at month eleven costs 1 percent load plus 20 percent short-term capital gains. Waiting four weeks removes both, and that is often the single most valuable thing a distributor tells a client all year.
   6. Entry load being banned in 2009 was the more consequential reform. It is why Indian distribution moved to trail and why the direct-versus-regular gap, rather than a front-end charge, is where commission now lives.

   Where candidates lose it

   Saying the AMC keeps the exit load. It goes to the scheme. And do not forget to combine the load with the capital gains position when advising — an interviewer will hand you a client at month eleven and see whether you spot both costs.

   Expect next

   • A client wants to redeem an equity fund at month eleven. What do you advise?
   • Why was entry load banned?
   • Is exit load charged on a switch?
6. 051A client holding 30 lakh in regular plans wants to move to direct plans. Walk me through the consequences.Costs, plans and commissionsIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   It is a redemption and a fresh purchase, so it triggers capital gains tax and possibly exit load, even though the scheme and the portfolio are identical. The right answer is almost never to switch everything at once — it is to stop fresh flows into regular, and move the existing corpus in tax-aware tranches.

   Then walk it

   1. The switch is two transactions. Units in the regular plan are redeemed at NAV, gains are taxable, and the proceeds buy direct plan units at that plan's NAV. There is no tax-free plan conversion in India.
   2. Cost of doing it badly: suppose 30 lakh includes 10 lakh of long-term equity gains. At 12.5 percent above the 1.25 lakh exemption that is about 1.1 lakh of tax paid today. The annual saving from 1 percent lower TER is about 30,000 rupees, so you are roughly three to four years to break even.
   3. So sequence it. First, redirect all new SIPs and lump sums into the direct plan — that is free. Second, switch the units that are already long-term and sitting on small gains. Third, use the annual 1.25 lakh exemption each year to move a tranche tax-free.
   4. Check exit load before each tranche. Anything bought in the last twelve months in an equity fund will pay 1 percent, which usually makes waiting the better choice.
   5. Then the thing nobody mentions: the moment he goes direct, the distributor relationship ends. If that distributor was the reason he stayed invested through 2020, the 1 percent was cheap. Ask what the distributor has actually been doing before advising the switch.
   6. And if he does want advice, point him at a flat-fee registered investment adviser who works in direct plans. The cost becomes visible and separable, which is the honest version of what he is trying to achieve.

   Where candidates lose it

   Treating the switch as a free administrative change. It is a taxable redemption. The candidate who quantifies the break-even in years, and who asks what the distributor was providing before removing them, is giving advice rather than reciting a cost comparison.

   Expect next

   • How would you use the annual exemption to phase it?
   • What if the holdings are in ELSS?
   • When would you tell him to stay in regular plans?

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.