According to Blackrock, their institutional clients currently allocate an average of 25% of their portfolios towards alternatives, which is expected to rise to between 30-40%, whereas ordinary investors will increase their alternatives allocation from 3% to 25%. The demand for alternative investment managers is likely to continue to rise in the foreseeable future.
If you’re considering a career in alternative investment management, the Chartered Alternative Investment Analyst (CAIA) designation is worth looking into.
This comprehensive guide is packed with the latest information that will help you decide if the CAIA designation works for you.
What Is A CAIA Designation?
Chartered Alternative Investment Analyst (CAIA) is a professional designation for investment professionals offered by the CAIA Association. Aspiring alternative investment professionals need to complete and pass 2 levels of examination.
The CAIA Association – a non-profit organization founded by the Alternative Investment Management Association (AIMA) and the Center for International Securities and Derivatives Markets (CISDM) in 2002 – is the global leader and authority in alternative investment education. The CAIA Association conducted its first exam in February 2003. Since then, thousands of individuals worldwide have registered for the program, with more than 11,000+ current CAIA members worldwide.
There is strong demand for the CAIA certification – CAIA members have grown by an average of 10% per year since 2009.
While the CAIA certification can be perceived as more niche in the alternative investment space, its members’ occupation are more evenly distributed across roles such as portfolio manager, consultant, sales & marketing, analyst, asset allocator, risk manager, fund administration, accounting & legal roles.
CAIA Exam Details, Summarized
The CAIA certification is a two-part examination, with each exam lasting 4 hours long:
- CAIA Level 1 consists of 200 multiple-choice questions, whereas
- CAIA Level 2 consists of 100 multiple-choice questions in Section 1, in addition to 3 sets of constructed-response (essay type) questions in Section 2.
The CAIA Level 1 curriculum concentrates on the fundamentals of alternative investment markets, building up candidates’ understanding of different asset classes. CAIA Level 2 focuses on more advanced topics in alternative investments by incorporating recent academic and industry research in alternative investments, asset allocation and risk management. Less than 30% of CAIA Level 1 and 2 questions would require calculations.
In terms of study hours, it is recommended that candidates devote at least 200 hours of study time for each level.
CAIA exams take place twice a year during March and September for both levels. The exams are administered via computer at proctored Pearson VUE test centers around the world. You can find your nearest CAIA exam center here.
Given COVID-19, online proctored exams (at home or an office) are now available as an option for candidates as well, subject to meeting the environmental and technical requirements.
There are no negative markings for incorrect answers in the CAIA exams. The passing score is determined by CAIA Association each year, although candidates who earn 70% or more are assured of passing the exam.
The exam results are sent to candidates via email around 3 and 6 weeks after the last exam for Level 1 and Level 2 candidates respectively. The result is simply a pass or fail, but candidates will be provided with performance report to understand the areas of relative strength and weakness compared to a reference group.
CAIA Pass Rates Since 2006
CAIA Association recently announced the latest CAIA Level 1 exam results (Mar 2020) with a 54% pass rate.
Some interesting observation from CAIA exam’s historical pass rates:
- Since 2011, Level 1 pass rates continues its downward trend and remained below 70%, compared to the earlier periods of 2006-2011.
- Level 2 pass rates ranges from 56%-70% since 2006, seemingly moving in a cyclical manner.
- Both CAIA Level 1 and Level 2 have a 10-year average pass rate of 63%.
CAIA Exam Topics
CAIA Level 1
The CAIA Level 1 exam mainly focuses on the introduction to alternative investments by covering the various asset classes. The topics areas and exam weights are as below:
|CAIA Level 1 Topics||Weighting|
|Professional Standards and Ethics||15% – 25%|
|Introduction to Alternative Investments||20% – 28%|
|Real Assets||11% – 17%|
|Hedge Funds||12% – 20%|
|Private Equity||11% – 17%|
|Structured Products||10% – 14%|
CAIA Level 2
The Level 2 exam builds on the foundation of Level 1 and adds on recent academic and industry research in alternative investments, asset allocation, and risk management.
CAIA Level 2 is unique in the sense that the exam is split into 2 sections of 2 hour each, consisting of 100 multiple-choice questions (Section 1) and 3 sets of constructed-response questions (Section 2). Despite the equal time allocation per section, the multiple-choice section forms majority (70%) of the Level 2 exam weight, and the essay-type questions only 30%.
|CAIA Level 2 Topics||Multiple Choice Topic Weight||Constructed-Response Topic Weight|
|Professional Standards and Ethics||0%||10%|
|Current and Integrated Topics||0%||10%|
|Asset Allocation and Institutional Investors||8% – 12%||0% – 10%|
|Private Equity||11% – 15%||0% – 10%|
|Real Assets||13% – 17%||0% – 10%|
|Commodities||5% – 7%||0% – 10%|
|Hedge Funds and Managed Futures||18% – 22%||0% – 10%|
|Structured Products||5% – 7%||0% – 10%|
CAIA Registration Fees (USD)
CAIA exam fees are pretty straightforward. They are the same for each Level, and only vary depending on:
- the date of registration and
- whether you’re a new or returning candidate.
|Fee Type (for all Levels)||CAIA Fees (per Level)|
|1) One-off Enrollment Fee|
(paid once only during the first CAIA registration)
|2) Exam Registration Fee|
(only applicable to first time Level 1 or Level 2 candidates)
|3) Exam Registration Fee for Retakes (if applicable)||$450|
* The CAIA Association offers a US$100 discount on first-time exam registration fees for candidates who register before the early registration deadline.
There is a one-off enrollment fee of $400 that applies to first time CAIA candidates:
- For new Level 1 CAIA candidates, the total fees would be $1,550-$1,650 which includes this one-off enrollment fee.
- For new Level 2 CAIA candidates, the total fees would just be the exam registration fee of $1,150-$1,250, depending how early you registered.
Exam retake fees for both levels are cheaper, being just $450 per retake per level.
CAIA Exam Dates & Registration Deadlines
Both levels of CAIA exams are conducted twice a year in March and September. This provides candidates the opportunity to complete the CAIA program within 1 year, if they passed consecutively. That said, CAIA Level 1 and Level 2 exams cannot be taken within the same exam window.
Candidates have the option of booking their exam date in a 10 business day window during the exam periods. All exams are administered internationally in computerized format exclusively at proctored Pearson VUE test centers.
|CAIA Registration Deadlines||March 2021 CAIA Exams||September 2021 CAIA Exams|
|Registration Opens||5 October 2020||5 April 2021|
|Early Registration Deadline||16 November 2020||17 May 2021|
|Registration Closes||8 February 2021||9 August 2021|
|Level 1 Exam Window||22 February – 5 March 2021||30 August – 10 September 2021|
|Level 2 Exam Window||8 – 19 March 2021||13 – 24 September 2021|
What Are the CAIA Charter Requirements?
In order to obtain the CAIA designation, candidates must have the following prerequisites:
- Passed both Level 1 and Level 2 exams (unless you’re part of the CAIA stackable credential pilot program whereby CAIA Level 1 is waived for CFA charterholders); and
- Work experience requirements:
- Holds a bachelor’s degree or its equivalent, and have more than 1 year of full-time professional experience within the regulatory, banking, financial or related fields; or
- Alternatively, a candidate must have at least 4 years of full-time professional experience within the regulatory, banking, financial or related fields.
- Paid for CAIA Association Membership (1 or 2 years); and
- Abide by the Member Agreement.
Unlike the FRM certification, CAIA candidates have unlimited time to pass the Level 2 exam after passing Level 1 to qualify for the CAIA Charter.
Benefits of CAIA Designation
The CAIA charter is a globally recognized designation, known as the benchmark for best practice in the alternative investment profession. Earning the CAIA designation sets you apart as a financial professional with the knowledge, skills, and experience necessary to provide sound advice on alternative investment strategies.
Once you earn the CAIA designation, you can expect to:
- Differentiate yourself and further boost your alternative investments credentials in the financial industry
- Be recognised and respected among employers, peers, and clients as a knowledgeable expert in alternative investing.
- Increase your career opportunities and enhance your earning potential.
- Broaden your client base and professional networking connections through membership and global chapters.
CAIA vs CFA – Which is Right for You?
In short, CAIA is highly specialized and has a stronger focus on alternative investments, whereas the CFA designation covers a broader scope of financial analysis, portfolio management and investment topics.
From a career building perspective, both CAIA and CFA are globally recognized designations with ample employment opportunities in their respective areas of expertise, granted that the CFA qualification is more well known due to its longer history. Plenty of finance professionals obtain both qualifications to better perform in their roles and career, especially via CAIA’s stackable credential pilot program, which allows CFA charterholders who have no CAIA exam history to skip CAIA Level 1 exams.
It really depends on your preferred career route: if you’re into alternative investment sector, CAIA seems to be the clear choice. If you’re less sure but keen on a career in finance, perhaps CFA is a better choice for a broader finance base.
Here’s a quick summary comparing both designations:
|Pre-exam qualifications||Have a bachelor’s degree; orFinal year undergraduate of a bachelor’s program; orHave a combination of college degree and full time work experience that totals 4 years.||None. However, basic foundation in finance and quantitative aptitude is desirable.|
|Study Areas||10 Topics: Ethics, Quantitative Methods, Economics, Financial Reporting & Analysis, Corporate Finance, Equities, Fixed Income, Derivatives, Alternative, Portfolio Management.|
|8 Topics: Professional Standards and Ethics, Current & Integrated Topics, Asset Allocation & Institutional Investors, Private Equity, Real Assets, Commodities, Hedge Funds & Managed Futures, Structured Products.|
|Number of Exams||3 levels (fastest route is in 18 months)||2 levels (unlike FRM, you cannot sit for both exams in the same exam window)|
|Exam Frequency||From 2021, CFA exams will transition to computer-based testing for all levels with increased frequency:Level 1: 4x a year (Feb, May, Aug and Nov).Level 2: Twice a year (May and Aug in 2021, and 2022 onwards Feb and Aug).Level 3: Twice a year (May and November).||For both Levels: Twice a year in March and September.|
|Exam Format||Level 1: Multiple choice questionsLevel 2: Item set questions (multiple choice)Level 3: Item set and constructed response questions||Level 1: Multiple choice questionsLevel 2: Multiple choice and constructed response questions|
|Pass Rates||The range of CFA pass rates since 2010:Level 1: 36%-43%Level 2: 39%-47%Level 3: 46%-56%||The range of CAIA pass rates since 2010:Level 1: 52%-74%Level 2: 56%-64%|
|Fees and Costs||One-off Enrollment Fee: $450Registration fee (per level): $700-$1,000Retakes: same as registration fee||One-off Enrollment Fee: $400Registration fee (per level): $1,150-1,250Retakes: $450 per level|
|Study Hours Needed||At least 300 hours per level||At least 200 hours per level|
|Post Exam Requirements||To become a CFA charterholder:Pass all the 3 levels of CFA exams;4 years of qualified investment work experience;Submit reference letters for 2-3 professional references;Become a regular member of CFA Institute;Adhere to CFA ethics and professional conduct.||To become a CAIA charterholder:Pass both levels of CAIA exams;Hold a bacherlor’s degree, or the equivalent, and have at least 1 year professional work experience; or alternatively, have 4 year professional work experience;Abide by CAIA’s member agreement;Pay CAIA membership fees.|
CAIA is definitely a good recommendation if you’re looking at a career in alternative investment, and demand is increasing in the hedge fund industry.
The relatively smaller pool of current CAIA charterholders could – to some extent – be seen as an advantage over peers, with more employers adding the CAIA designation as a preferred or required qualification. While CAIA designation is well established in the US, it is slowly gaining traction in Europe and Asia, continuing building its brand presence globally as the benchmark in alternative investments.
Obtaining the CAIA charter whilst it is relatively ‘new’ could be a good bet if you’re interested in the alternative investment space.
Are you considering CAIA, as well as the CFA designation? Share your thought process with us below!
Meanwhile, you may find these related articles in our Beginner’s Guide series of interest:
- What Is The CFA Exams? A Useful Beginner’s Guide
- FRM (Financial Risk Manager): A Beginner’s Guide
- IMC (Investment Management Certificate): A Beginner’s Guide
- CFA Investment Foundations: A Beginner’s Guide
- Certificate in ESG: A Beginner’s Guide
- Sustainability & Climate Risk (SCR) Certification: A Beginner’s Guide