Asset Management
Running portfolios against a stated objective for clients who are usually institutions. Mostly liquid instruments, mostly measured against an index or a liability.
Buy-Side: Decides whether to take it. the whole map
The seats
three of them, each answering the same six questions so that they can be read against each other.
Next to it
The other groups on the same side of the price.
Private Markets Hedge Funds & Alternatives Wealth Management Insurance & Pensions
What an interview asks here
Asset management questions are checking whether you can separate a decision from an outcome, which is the whole discipline of the seat.
Try each one out loud before you open it. What is underneath is the shape of a complete answer, not a script — somebody who can produce those parts in their own words can also answer the four variations that follow, and somebody who has memorised a paragraph can answer one.
Q1A fund beat its benchmark by three points. What have you learned?
What it is checking. Almost nothing, and saying so is the answer.
A complete answer contains:
- Over one period, very little: the sample is far too small to separate skill from luck.
- The useful decomposition is where the return came from — allocation, selection, currency, or a factor tilt that was not the stated strategy.
- Then whether it came from the risk the mandate authorised, because return from unauthorised risk is a governance problem however good it was.
- And what it cost: fees and turnover come out of the same number.
Read it properly: What drives returns · Portfolio management
Q2Why is tracking a rule harder than choosing?
What it is checking. The index question, and it separates people who think passive means easy.
A complete answer contains:
- The rule is public, so everybody knows what has to be traded and when, and the flow is front-run.
- Full replication costs turnover; sampling introduces tracking error that has to be managed rather than accepted.
- Corporate actions, dividends, withholding tax and rebalance dates all have to be handled exactly, not approximately.
- The measure is tracking difference against tracking error — the average gap and how variable it is are different failures.
Read it properly: Index and ETF management · Why a fund differs from the index
Q3What does a fund's published price actually depend on?
What it is checking. The half of asset management nobody outside it sees.
A complete answer contains:
- A valuation struck by the administrator, from prices sourced independently of the manager.
- Which is straightforward for listed equities and a matter of judgement for anything without a screen price.
- It also depends on the timing convention — a fund holding assets that close in another time zone is valuing something stale by construction.
- That is why swing pricing and dilution levies exist: the price has to be fair to the people staying as well as the ones dealing.
Read it properly: Fund operations · Custody and securities services
Q4When does a fund's own liquidity become the risk rather than the market's?
What it is checking. The mismatch between what a fund promises and what it holds.
A complete answer contains:
- When the dealing terms are more liquid than the assets: daily redemption against holdings that take weeks to sell.
- Redemptions are then met by selling the easiest assets first, which leaves the remaining holders with a worse portfolio.
- That creates an incentive to leave early, which is the mechanism of a run.
- The tools are gates, notice periods and honest dealing terms — and using them is an admission the mismatch existed.
Read it properly: Can a fund stop redemptions · 2019
Q5How do costs actually reach the investor?
What it is checking. The largest single lever on a long-horizon outcome, and most of it is not on a statement.
A complete answer contains:
- The management fee is the visible part and usually the smaller one over time.
- Transaction costs, spreads and market impact come out of the fund's return without appearing as a charge.
- Cash drag, tax on income and securities lending arrangements all move the outcome too.
- And it compounds: the same arithmetic that grows a return grows a cost, in the other direction.
Read it properly: Costs and fees · What the fees cost
Q6What is a benchmark for, and when is it the wrong question?
What it is checking. The reference point that quietly defines the job.
A complete answer contains:
- It states what the fund is trying to do and gives the client something to judge it against.
- It also defines risk: for a benchmarked mandate, risk is deviation from the benchmark rather than loss.
- That is the wrong frame for anybody with a liability — a pension or an insurer — where the reference point is the payment owed.
- So the first question about any mandate is what the money is for, and the benchmark follows from that.
Read it properly: Building an allocation · Pensions and retirement
Q7Explain diversification to somebody who owns forty funds.
What it is checking. Counting holdings is not diversification, and this is the most common misunderstanding on the buy-side.
A complete answer contains:
- Diversification is about what the holdings do together, not how many there are.
- Forty funds that all own large listed equities are one position with forty fee lines.
- Correlation is the measure, and it is not stable — things that behaved independently converge in a stress.
- So the useful test is what the whole portfolio does in the scenarios that would hurt, not how long the holdings list is.
Read it properly: Diversification · Running a portfolio review
Do these against a clock — one at a time, ninety seconds each, answer before you look.
Whose questions these are. Every question on this page was written for this publication. None is taken from anybody else’s question bank, and none is a claim about what any named firm asks — that is neither verifiable from here nor ours to assert. They are our own reading of which mechanism a question of this kind is testing. Information and education only.
Test yourself: five questions
Five quick questions on this part of the industry — checked entirely on your device, nothing stored or sent. Wrong answers come with explanations, and the seat pages above hold every answer. For education only.