Ch.11 · Scheme Performance

Scheme Performance Disclosure Rules

30 practice questions on this topic

What is 'portfolio turnover ratio' as shown in a mutual fund fact sheet?

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EXPLANATION

Portfolio turnover ratio measures how frequently a fund manager trades the portfolio. A ratio of 100% means the entire portfolio was replaced once during the year. High turnover implies higher transaction costs and may indicate frequent active trading.

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Which of the following best describes 'quartile ranking' in mutual fund peer comparison?

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EXPLANATION

Quartile ranking sorts all funds in a SEBI category by performance and divides them into four groups. Q1 (top 25%) funds are the best performers; Q4 (bottom 25%) are the worst. Consistent Q1 or Q2 performance across multiple periods is a positive indicator of fund quality.

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SEBI mandates that mutual fund performance be disclosed for which standard periods?

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EXPLANATION

SEBI requires mutual funds to disclose scheme performance for standard periods: 1 year, 3 years, 5 years, and since inception — both for the scheme and its benchmark. This standardisation allows investors to compare funds fairly across AMCs.

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What is 'Information Ratio' in mutual fund performance analysis?

A.The ratio of the fund's AUM to the number of securities in the portfolio

B.The amount of information disclosed in the fact sheet relative to SEBI requirements

C.A measure of the consistency of alpha — excess return over benchmark per unit of tracking error

D.The ratio of active positions to passive positions in the portfolio

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What is 'side pocketing' in the context of mutual funds?

A.A technique where fund managers hold cash in a separate account to manage redemptions

B.The practice of holding securities in a nominee's account for regulatory compliance

C.A tax planning strategy where gains are deferred to a future period

D.The segregation of illiquid or defaulted debt securities into a separate portfolio to protect existing investors

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Which of the following is a SEBI requirement regarding benchmarks for mutual fund schemes?

A.All equity schemes must use the Nifty 50 as their benchmark

B.Schemes must use an appropriate benchmark that reflects the scheme's investment universe, and performance must be disclosed against it

C.AMCs can choose any benchmark they prefer without any restriction

D.Benchmarks must be changed every 3 years to ensure relevance

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In a fact sheet, 'R-squared' (R²) of a fund relative to its benchmark measures:

A.The fund's return squared to show compounding effect

B.The risk-adjusted return per unit of systematic risk

C.The proportion of the fund's return movements that can be explained by movements in its benchmark

D.The correlation between the fund's NAV and its AUM growth

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In a debt fund fact sheet, 'Macaulay Duration' is different from 'Average Maturity' because:

A.Macaulay Duration is the weighted average time to receive all cash flows (coupons + principal), while Average Maturity only considers the final repayment date

B.Macaulay Duration accounts only for the final maturity payment while Average Maturity considers all cash flows

C.Macaulay Duration is expressed in months; Average Maturity is expressed in years

D.There is no difference — both metrics measure the same thing

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Which of the following is a SEBI-mandated disclosure that helps investors assess credit risk in a debt mutual fund?

A.The fund manager's proprietary credit scoring model

B.A forward-looking credit outlook report published quarterly

C.Historical default rates of the AMC's debt schemes

D.Monthly portfolio disclosure including issuer names, credit ratings, and instrument-level allocation

Q10

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What does a Sharpe Ratio of 1.2 in a mutual fund fact sheet indicate?

A.The fund earned 1.2% return above its benchmark

B.The fund's NAV grew 1.2 times since inception

C.For every unit of total risk taken, the fund generated 1.2 units of excess return above the risk-free rate

D.The fund underperformed its benchmark by 1.2%

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