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. 011An investor submits a 5 lakh purchase into a liquid fund at 1:20 pm and the money is credited to the scheme account at 3:10 pm the same day. Which NAV does he get, and what has he lost?NAV and operationsHardtechnicalFund operationsCorporate treasury desks

   Say this

   He gets that same day's closing NAV, not the previous day's, because the funds were not available for utilisation before the 1:30 pm cut-off. He has lost one day of accrual — on 5 lakh in a liquid fund at around 6 percent, that is roughly 80 rupees.

   Then walk it

   1. The two tests are independent: application time-stamped before 1:30, and funds available for utilisation before 1:30. He passes the first and fails the second.
   2. Because the money became available after 1:30 but still on the same day, the allotment is made at the closing NAV of the day immediately preceding the next business day — which is today's closing NAV.
   3. Had the credit landed at 4 pm and only been available the next morning, he would instead get the NAV of the day preceding that availability, so the arithmetic changes again. The rule always keys off the day the money is usable by the scheme.
   4. The reason liquid funds are structured this way is that units allotted at the previous day's NAV start earning from today. If you got yesterday's NAV without yesterday's money in the scheme, existing unitholders would be funding your return.
   5. Scale it up before you close. On a 50 crore corporate treasury ticket, one day at 6 percent is about 8 lakh rupees. This is why treasuries fund by RTGS in the morning, not by cheque at lunchtime.
   6. And the operational point: the AMC cannot make an exception. The RTA applies it mechanically off the bank credit time, and any override is an audit finding.

   Where candidates lose it

   Answering from the time stamp alone and giving him the previous day's NAV. The time stamp only makes the application valid; realisation of funds decides the NAV. Also, do not quote a rule you cannot apply — the interviewer will change the credit time to 4 pm and see if your logic survives.

   Expect next

   • Now the money is credited at 4 pm. What changes?
   • What if it were an equity fund instead?
   • How would you advise a treasury client to avoid this entirely?
2. 021A client wants mid and small cap exposure. Would you use a large and mid cap fund, or a large cap fund plus a separate mid cap fund?Equity schemesIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   Two separate funds, in almost every case. A large and mid cap fund locks you into 35 percent minimum in each and hands the remaining 30 percent to the manager, so you cannot control the exposure you came for. Two funds let you set the split and rebalance it.

   Then walk it

   1. With separate funds you decide the ratio. Want 70 large and 30 mid? You own it. In a large and mid cap fund you get whatever the manager chooses inside the 35-35 floor, and it drifts.
   2. You also get to rebalance mechanically. After a mid cap run-up you can trim back to target, which is the single highest-value thing a retail portfolio does. Inside a single fund that rebalancing happens at the manager's discretion, if at all.
   3. And you can choose differently by segment: index the large cap sleeve at 5 to 15 basis points, pay active fees only on the mid cap sleeve where dispersion between managers is genuinely wide.
   4. The case for the single fund is real but narrow. For a small portfolio, one folio is simpler, rebalancing inside the fund is not a taxable event, and it removes the behavioural risk of a client who panics and stops the mid cap SIP in a drawdown.
   5. Put a number on the tax point: shifting 5 lakh between two schemes to rebalance can trigger 12.5 percent on the gain above the exemption. Inside one fund the manager rebalances tax-free at the scheme level.
   6. So my answer: two funds for a portfolio above roughly 10 lakh where the client will actually rebalance, one large and mid cap fund for a smaller or behaviourally fragile investor. And say which assumption drives the choice, because that is the actual judgement.

   Where candidates lose it

   Answering purely on structure and ignoring tax and behaviour. The interviewer is testing advisory judgement, not category recall. Also, do not forget that rebalancing across schemes is a taxable redemption in India — a US-trained answer misses this entirely.

   Expect next

   • How would you rebalance without triggering tax?
   • How many funds should this client end up with in total?
   • Would you index the large cap portion?
3. 022When does a sectoral or thematic fund belong in a portfolio?Equity schemesIntermediatetechnicalDistribution and salesProduct and strategy roles

   Say this

   Rarely, and only as a small satellite for an investor who has an explicit view and a defined exit. Eighty percent in one sector means you have taken the diversification out of a diversified product, and the category's flow pattern shows investors buy these at exactly the wrong time.

   Then walk it

   1. The mandate is the risk: minimum 80 percent in the stated sector or theme, so the manager cannot de-risk even if he thinks the sector is expensive. You have hired a stock picker and removed his asset allocation decision.
   2. Sector returns are far more dispersed than market returns. Indian pharma, IT and PSU banking have each had three-year stretches of both severe underperformance and violent outperformance. A five-year hold in the wrong entry year can leave you behind a plain index fund.
   3. The flow evidence is damning. NFOs and inflows into a theme peak after the theme has already run, because that is when the one-year return on the fact sheet looks irresistible. The investor return in these categories is systematically worse than the fund return.
   4. Where it is legitimate: a genuine view you can articulate and falsify, sized at 5 to 10 percent of the equity allocation, with a written exit condition. Or a structural exposure the investor cannot get elsewhere, such as an international theme.
   5. It is also the category with no one-scheme-per-AMC limit, which is exactly why the industry launches so many of them. Knowing that link between the regulation and the sales pipeline is the mark of someone who understands the business.
   6. So what I would actually say to a client: if you cannot tell me what would make you sell it, you are not making a thematic investment, you are chasing a fact sheet.

   Where candidates lose it

   Either dismissing the whole category or selling it enthusiastically. Both are wrong. The answer an AMC or a distributor wants is a sizing rule, an exit condition, and an honest statement that category flows prove retail investors time these badly.

   Expect next

   • Why does SEBI allow multiple thematic schemes per AMC?
   • How would you size a thematic position?
   • What is the difference between a sectoral and a thematic fund?
4. 028A corporate treasurer has 40 crore of surplus he will need in about 45 days. Overnight fund, liquid fund or money market fund?Debt schemesIntermediatecase studyCorporate treasury desksIndian AMCs

   Say this

   Liquid fund, for a 45-day horizon. Overnight gives up yield for liquidity he does not need, and a money market fund holds paper out to a year, so it carries mark-to-market risk over a window this short. Liquid caps residual maturity at 91 days, which roughly matches the horizon.

   Then walk it

   1. Overnight funds hold one-day paper, so there is effectively no rate risk and no credit risk, but the yield is the lowest of the three. That is the right answer for money he might need tomorrow, not in 45 days.
   2. Liquid funds hold paper up to 91 days residual maturity. Since the move to full mark to market the NAV does move, but with average maturity under about 60 days the sensitivity is small — a 25 basis point move costs a few basis points of NAV.
   3. Money market funds can hold up to one year. That extra duration earns maybe 20 to 40 basis points more in a normal curve, but over 45 days a rate spike can wipe out more than the extra carry.
   4. Watch the graded exit load on liquid funds for redemptions inside seven days, introduced after the 2019 stress. Redeeming on day 3 costs a small penalty; by day 45 it is irrelevant. Say this, because treasurers ask.
   5. Then the operational detail that actually matters to a treasurer: the 1:30 pm purchase cut-off and the realisation rule. Funding by RTGS in the morning gets him the previous day's NAV; a 2 pm transfer loses a day, which on 40 crore at 6 percent is about 66,000 rupees.
   6. One check before recommending: the scheme's top-10 investor concentration. A liquid fund where three corporates hold 60 percent of AUM is a fund where someone else's quarter-end redemption becomes his problem.

   Where candidates lose it

   Answering with the highest-yielding option. Treasury money is about certainty of principal on a known date, not yield. And if you do not mention the 1:30 pm cut-off and the seven-day exit load, an institutional sales interviewer will conclude you have never spoken to a treasurer.

   Expect next

   • Now he says he might need it on any day with 24 hours' notice. What changes?
   • What is the exit load structure on a liquid fund?
   • How would you check the fund's investor concentration?
5. 031Tell me what happened at Franklin Templeton India in April 2020 and what the industry learned from it.Risk, liquidity and disclosureHardsuperdayIndian AMCsRisk and compliance

   Say this

   On 23 April 2020 Franklin Templeton wound up six open-ended debt schemes holding roughly 26,000 crore, froze redemptions overnight and told investors they would get their money back as the underlying bonds matured or could be sold. It was a liquidity failure, not primarily a credit failure, and it is the single most important case in Indian mutual funds.

   Then walk it

   1. The schemes — Low Duration, Ultra Short Bond, Short Term Income, Credit Risk, Dynamic Accrual and Income Opportunities — had reached for yield in lower-rated, often unlisted and structured paper, in a market where such bonds barely trade at the best of times.
   2. Then Covid hit. Redemptions accelerated, the secondary market for sub-AAA corporate paper effectively stopped, and the funds had already borrowed to meet earlier redemptions. With nothing left to sell at any reasonable price, the AMC chose to wind up rather than keep selling the best assets and leave the remaining investors with the worst.
   3. The regulatory sequel: SEBI found violations of the regulations, barred the AMC from launching new debt schemes for two years and ordered repayment of over 500 crore of investment management fees with interest. The Supreme Court required unitholder consent for the wind-up, and SBI Mutual Fund was appointed to monetise the portfolios.
   4. Investors did get their money back — in aggregate more than the 23 April NAV — but over roughly two and a half years, in instalments, with no ability to plan around it. That gap between eventual recovery and immediate access is the definition of liquidity risk.
   5. What changed as a result: minimum liquid asset buffers of 10 percent for open-ended debt schemes and 20 percent for liquid funds, full mark to market on the debt book, the swing pricing framework, tighter caps on unlisted and structured paper, and the Potential Risk Class matrix.
   6. The lesson I would give an interviewer in one line: in debt funds the yield you can see is small and the liquidity you cannot see is the whole risk. A 60 basis point yield pickup never compensates for a portfolio you cannot exit.

   Where candidates lose it

   Calling it a default or a fraud. Most of the paper eventually paid. The failure was the mismatch between daily redemption promises and a portfolio of bonds nobody would bid for. Getting that distinction wrong on a fixed income or risk interview is fatal, because the whole post-2020 rulebook follows from it.

   Expect next

   • Could it happen again under the current rules?
   • What is the liquid asset requirement now?
   • How would you have spotted the risk in those portfolios beforehand?
6. 034How would you assess liquidity risk in a debt fund's portfolio before recommending it?Risk, liquidity and disclosureHardcase studyIndian AMCsRisk and compliance

   Say this

   Pull the monthly portfolio and ask one question of every line: who would buy this from me next Tuesday, and at what price? Then look at the other side of the balance sheet — who owns the units. Liquidity risk is the interaction of an illiquid asset book with a concentrated investor base.

   Then walk it

   1. Asset side, in order: how much is in cash, treasury bills, government securities and repo, against the 10 or 20 percent minimum. How much is unlisted. How much is rated below AA. How much sits in structured obligations or credit-enhanced paper.
   2. Then issuer and group concentration. A 9 percent position in one mid-sized NBFC is a bigger liquidity problem than a 20 percent position in government securities, because the exit is a single phone call to a market that may not answer.
   3. Then maturity profile against the fund's own category. A short duration fund holding three-year unlisted paper has reached for yield by taking illiquidity, and the yield pickup is the tell — if the portfolio YTM is 150 basis points above the equivalent gilt, something in there does not trade.
   4. Liability side: the top-10 investor concentration disclosed in the fact sheet. If a handful of institutions hold half the AUM, a single quarter-end redemption forces the sale, and retail unitholders eat the impact cost.
   5. Then the stress question I would actually run: if 20 percent of AUM redeemed on Monday, what would the manager have to sell, and would the printed NAV survive it? That is the Franklin Templeton question asked in advance.
   6. And check AUM trend. A fund shrinking steadily is concentrating its illiquid tail, because the liquid assets are the first to go out of the door. A shrinking credit fund is a warning, not a bargain.

   Where candidates lose it

   Assessing credit quality and calling it liquidity analysis. AAA paper from a small issuer can be untradeable. The two things candidates miss entirely are the top-10 investor concentration on the liability side and the AUM trend, and both are printed in the monthly fact sheet.

   Expect next

   • Where would you find the top-10 investor concentration?
   • Is a shrinking debt fund safer or riskier?
   • What yield spread over gilts would make you suspicious?
7. 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?
8. 040An index fund charges a 0.10 percent expense ratio but lagged its index by 0.35 percent last year. Where did the other 25 basis points go?Index funds and ETFsHardtechnicalPassive and index teamsIndian AMCs

   Say this

   Costs that sit outside the expense ratio. In order of likely size: cash drag from flows, transaction costs and securities transaction tax on rebalancing, dividend timing, and the fact that the index is a theoretical portfolio with no settlement cycle and no taxes.

   Then walk it

   1. Cash drag first. Money arriving through the day cannot be invested until it is available, and a fund holding even half a percent in cash in a year the index rose 15 percent gives up around 7 basis points.
   2. Rebalancing costs. When the index changes constituents the fund must trade, paying brokerage, securities transaction tax and market impact. Impact is the expensive part, because every index fund is trading the same name on the same day at the same close.
   3. Dividend treatment. A total return index assumes dividends are reinvested instantly on the ex-date. A real fund receives the cash days later and may pay tax on it, so it is out of the market in between.
   4. Then the small ones: creation and redemption frictions, corporate action handling, and any sampling if the fund does not fully replicate.
   5. A useful sanity number: for a large cap Indian index fund, a well-run product lands around 15 to 30 basis points of tracking difference on a 10 basis point TER. If it is more like 60 to 80, the cause is usually persistent cash drag or a small AUM that makes rebalancing expensive per unit.
   6. And the diagnostic question I would ask the AMC: is the gap stable year on year or lumpy? Stable means structural cost, which you can price in. Lumpy means operational quality, and that is the reason to avoid the fund.

   Where candidates lose it

   Answering 'the expense ratio' when the question has already told you the expense ratio. The interviewer wants the costs outside TER. Missing cash drag is the specific failure — it is usually the biggest single component and the one nobody names.

   Expect next

   • How would you reduce cash drag?
   • Why is index rebalancing expensive for everybody at once?
   • What tracking difference would you accept before switching funds?
9. 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?
10. 056A 62-year-old retiree has 1.2 crore and needs 60,000 a month. Design the mutual fund portfolio.SIP and investor mechanicsHardcase studyWealth and advisoryDistribution and sales

    Say this

    Sixty thousand a month is 7.2 lakh a year on 1.2 crore, a 6 percent withdrawal rate. That is too high to be safe for a 25-year retirement, so the first thing I do is say that out loud. Then I would build three buckets and run the SWP from the shortest one.

    Then walk it

    1. Start with the arithmetic, not the product. A 6 percent withdrawal growing with inflation from a portfolio expected to return 9 to 10 percent nominal has a meaningful chance of running out before age 85. Either the corpus grows, the withdrawal falls to about 4.5 percent, or there is another income source.
    2. Bucket one, two to three years of spending, around 20 lakh, in a liquid and short duration mix. This is what the SWP actually draws from, so no month's income depends on the equity market.
    3. Bucket two, roughly 40 lakh, in short duration and target maturity debt or a conservative hybrid. This refills bucket one and covers years three to eight.
    4. Bucket three, roughly 60 lakh, in equity — a large cap index fund plus one flexi cap. This is the inflation defence, and it must not be touched for a decade. Fifty percent equity at 62 sounds aggressive to a client and is the only thing that stops the corpus dying at 80.
    5. Then the operational design: SWP of 60,000 on a fixed date from the debt bucket, annual rebalancing to refill, and an explicit rule that in a year the market is down more than 20 percent you refill from debt only. That rule is what defends against sequence-of-returns risk.
    6. Tax and the honest caveat: SWP is efficient because only the gain portion is taxed, and drawing from the debt bucket keeps equity gains long-term. But I would tell him plainly that 60,000 indexed for 25 years is not comfortably fundable from 1.2 crore, and the conversation to have is about the number, not the fund selection.

    Where candidates lose it

    Jumping straight to fund names. The examinable skill is checking whether the withdrawal rate is survivable and saying so. The second failure is putting a retiree entirely in debt, which feels safe and guarantees the corpus loses to inflation over 25 years.

    Expect next

    • What withdrawal rate would you be comfortable with?
    • Why not just use an annuity or the Senior Citizens Savings Scheme?
    • How do you handle a 30 percent equity drawdown in year two?

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.