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Why Become a Chartered Alternative Investment Analyst (CAIA)?

Are you considering a career as a chartered alternative investment analyst (CAIA)? If you are a current or aspiring financial analyst who enjoys assessing potential investments and providing guidance to others, becoming a CAIA may be a good fit for you. There are many benefits to becoming chartered, chief among them standing out among other financial analysts in the field who lack this credential. Only the Chartered Alternative Investment Analyst Association (CAIAA) can grant this globally recognized designation, and candidates must meet a variety of standards to qualify. Becoming chartered signifies that you have the necessary knowledge and skills to practice throughout the world and establishes you as part of a specialized financial sub-field. While certified financial analysts (CFAs) have a basic understanding of alternative investments, CAIAs receive more in-depth training. Additionally, this profession has a steady job outlook and offers a decent salary.

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What is a Chartered Alternative Investment Analyst?

It’s important to realize that not all alternative investment analysts have the CAIA designation. Professionals in the field agree, however, that being chartered is optimal and distinguishing, especially in the global market.

An alternative investment analyst is a financial professional capable of providing guidance to businesses and individuals when making investment decisions. They work primarily with alternative investment options including hedge funds, venture capital, private equity, derivatives, and real estate. Being chartered is often helpful to all investment analysts who work in traditional financial institutions and manage derivatives books or trading desks.

What Does an Alternative Investment Analyst Do?

Alternative investment analysts are often responsible for performing all the tasks a typical financial analyst does, including:

  • Recommending individual investments and financial portfolios
  • Evaluating financial data and investment opportunities
  • Studying economic and business trends
  • Examining financial statements to determine value
  • Meeting with clients to gain better insight into future prospects
  • Assessing management team strengths
  • Preparing verbal and written financial reports

Alternative investment analysts must also manage, analyze, distribute, and/or regulate real assets for individuals and/or companies. This means they regularly work with the financial aspects of real estate, infrastructure, natural resources, commodities, and intangible assets. Additionally, these professionals oversee hedge funds, private equity, and structured products such as collateralized debt obligations and credit derivatives.

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Chartered or not, alternative investment analysts primarily work in offices but may be required to travel when in-person meetings with clients are necessary. Most are employed by larger financial institutions located in major financial centers and work at least 40 hours a week with additional research often conducted at home.

Education Requirements to Become a CAIA

  • Degree Necessary
    Every position is different, but most employers expect alternative investment analysts to have, at minimum, a bachelor’s degree. There’s no specific field of study required for this degree, but the program selected should provide instruction appropriate for future success in the investment field. As a result, most students choose to pursue a degree in accounting, economics, finance, statistics, or mathematics.

    It’s important to note that there are also no degree or work requirements for taking the Chartered Alternative Investment Analyst Examination. This means it is possible for students to begin the certification process before graduation. Earning the official designation does necessitate, however, completing an undergraduate program and having a least one year of professional experience. Candidates may substitute four years of professional experience for the degree with approval. Other requirements include being a CAIA Association member and submitting two professional references.

  • Subject Focus
    The Alternative Investment Analyst Exam has two levels and includes everything central to alternative investments. The Level I exam focuses primarily on alternative asset classes and the various tools and techniques used to evaluate risk-return attributes. The Level II exam deals mostly with portfolio management. Both exams include sections that review ethics and professional conduct.

    Level I Topics

    • Professional Standards and Ethics
    • Introduction to Alternative Investments
    • Real Assets, Including Commodities
    • Hedge Funds
    • Private Equity
    • Structured Products

    Level II Topics

    • Ethics, Regulation, and ESG
    • Models
    • Institutional Asset Owners and Investment Policies
    • Risk and Risk Management
    • Methods for Alternative Investing
    • Due Diligence and Selecting Strategies
    • Volatility and Complex Strategies
    • Current and Integrated Topics
  • Exams
    There are two parts to the CAIA examination: Part I and Part II (also known as level I and level II). Both are administered via computer and allow test-takers four hours to complete. Level I consists of 200 multiple-choice questions; Level II has 100 multiple-choice questions and three essay questions. The recommended study time for each level is 200 hours.

    Candidates can choose from a variety of proctored Pearson VUE testing centers around the world and testing is available twice a year, once in March and again in September. Both Level I and II examinations are available during these times. It is worth noting that in-person testing requirements can vary due to unforeseen circumstances. To accommodate safety needs, online proctored exams may be administered at home or at an office, assuming all environmental and technical requirements can be met.

    Special accommodations are available to those who need them, but requests must be submitted to Candidate Services before scheduling an exam appointment. Additionally, all supporting documentation related to the condition reported must be current and signed by a treating physician.

    It’s also important to note that exam appointments cannot be made for at least 24 hours after submitting registration information on the CAIA Association website. Candidates should plan accordingly.

How is the CAIA Exam Scored?

The CAIA Association determines all passing scores for both parts of the CAIA Exam. There are no penalties for selecting wrong answers and exam results are provided as a pass/fail designation. Participants can expect their results to be sent via email within approximately three to six weeks, depending on the exam level.

While test-takers do not receive any negative marks for incorrect answers, a performance report is provided to highlight areas of relative strength and weakness. This report is based on the answers provided by a reference group comprised of candidates who score well enough to pass the exam.

Passing scores fluctuate slightly every year. In general, candidates who earn a score of 70% or higher will pass either exam. This number is primarily for the purpose of practice tests, however, as candidates’ actual scores are never provided.

Study Resources and Preparation for the Alternative Investment Analyst Exam

The Chartered Alternative Investment Analyst Exams are not easy to pass and proper preparation is absolutely necessary. For most, this means a minimum of 200 hours of studying recommended materials.

The CAIA Association provides a wide variety of helpful study materials and practice exams, though some may not be available until closer to exam dates. Some options are free, while others must be purchased in addition to the cost of exam registration.

Free and official resources include:

  • CAIA Candidate Handbook
    This downloadable document functions as a complete guide to the CAIA exam experience. It includes information pertaining to the CAIA curriculum, registration, study recommendations, exam appointments, exam structure, and results.
  • Standards of Practice
    Exam candidates should review the CAIA standards of practice. These regulations are contained within a downloadable handbook which can be accessed after creating a user account on the CAIA Association website.
  • CAIA Level I Study Guide
    This study guide is also downloadable online and identifies learning objectives and keywords to facilitate study for the CAIA Level I examination. Topics covered include preparing for the examination, topic weights, the calculator policy, an equation exception list, and an exam outline.
  • CAIA Level I Workbook
    The CAIA Level I Workbook is also easily downloadable online. It provides a number of helpful practice questions, exercise, and keywords to gauge test-taker knowledge prior to the examination.
  • Sample Exams Level I and Level II
    Registered candidates can prepare for the Level I and II examinations by taking sample exams provided by the CAIA Association. Access to these samples will become available soon and can be accessed on a new platform that closely reflects the real CAIA exam experience.
  • CAIA Study Guide Level II
    Like the Level I study guide, the CAIA Level II study guide is available as a free download online. It covers learning objectives and keywords to help facilitate successful study. Candidates can review preparatory information, topic weights, the calculator policy, an equation exception list, and an exam outline.
  • Workbook Level II
    This downloadable workbook is free and easy for candidate to access online. It offers a variety of practice questions, exercises, and keywords to test the knowledge necessary to pass the CAIA Level II examination.

Alternatively, candidates can purchase additional study materials offered by or promoted by the CAIA Association.

These include:

  • CAIA Curriculum Level I 2012
    The official CAIA Level I digital curriculum can be purchased for $125 (students get a 20% discount). The course includes everything a candidate will need to study for the examination, including over 250 session assessment questions, access to mobile-friendly studying, an exam planner, and free content updates.
  • Alternative Investments CAIA Level I 4th Edition Book
    Available as an e-book and in print, Alternative Investments: CAIA Level I, 4th Edition covers the fundamentals of the alternative investment space. It helps candidates build a strong foundation in alternative investment markets and looks closely at statistics used to define investment performance. The price ranges from $100 to $125.
  • CAIA Curriculum Level II 2012
    The official CAIA Level II digital curriculum can be purchased for $125 (students get a 20% discount). The course includes everything a candidate will need to study for the examination, including over 350 session assessment questions, access to mobile-friendly studying, an exam planner, and free content updates.
  • Alternative Investments: An Allocator’s Approach CAIA Level II Core Book
    Available as an e-book and in print, Alternative Investments: An Allocator’s Approach, 4th Edition explores new arenas within the alternative investments arena. It also helps candidates establish a solid understanding of alternative investments basics. The price ranges from $100 to $125.
  • Difficulty:

    Level I and Level II of the Chartered Alternative Investment Analyst Examinations are generally considered slightly less difficult than other credentials in the field, such as Certified Financial Advisor (CFA) and Financial Risk Manager (FRM). On average, more than half of candidates who take either exam receive a passing score.

    In 2019, the historical pass rate for Level I was 52% in September. The pass rate for Level II at the same time was 64%. While often viewed as simpler than other financial credentialing examinations, it’s worth noting that the CAIA exam pass rates have been steady declining for the last ten years. This could be due to an increase in the number of candidates registering to sit for the exam, but the questions are also becoming more and more challenging over time.

  • Cost:

    First-time candidates can pay an early rate of $1,150 to register for the Level I and Level II Chartered Alternative Investment Analyst examinations. These rates will increase the as the testing date approaches, however. Standard registration for those taking the Level I or Level II examination is $1,250. CAIA Association members have access to discounted rates of $1,035 for early registration and $1,125 for standard registration. Anyone seeking to retake either examination will pay $450.

    The CAIA Association also offers a study program for first-time candidates seeking to take the Level I examination. Enrollment in this program costs $400 for both early and standard registration.

Career & Salary

  • Where Might You Work:

    As with many financial positions, alternative investment analysts can either work for a single company or organization exclusively or offer their services as a private consultant. Because professionals in the financial sector are always in demand, there are numerous industries willing to hire them for their expertise.

    Some of the most prominent employers include the following types of companies, organizations, and agencies:

    • Securities, Commodity Contracts, and Other Financial Investments
    • Credit Intermediation
    • Professional, Scientific, and Technical Services
    • Management Companies and Enterprises
    • Insurance Carries
  • Career Outlook:

    According to PayScale, the average annual salary for investment analysts, which includes alternative investment analysts, is $65,414. This is well above the median annual wage of $37,690 for all occupations, as reported by the Bureau of Labor Statistics (BLS). In most cases, entry-level professionals can expect to make approximately $57,000 to $63,000 a year. Seasoned professionals with 10 to 20 years of experience can expect yearly salaries of between $94,000 and $102,000.

    Overall, the job outlook for investment analysts working in the United States is decent. The BLS projects there will be a 5% increase in job availability between 2019 and 2029. This is not as significant as some other financial professions, but it’s still faster than the national average for all other professions. The major reasons for this growth are likely increasing numbers of financial products available on the market and a need for specialty knowledge of geographic regions.

    The demand for financial analysts tends to fluctuate depending on the economy, with more economic activity usually leading to more available positions. Emerging markets throughout the world also provide exciting investment opportunities.

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    It’s worth noting that the Bureau of Labor Statistics predicts some competition for financial analyst positions. While many new positions will be created over the next ten years, there will still be more people interested or capable of doing the work than there will be available jobs.

  • Jobs:

    There are many employment opportunities available to chartered alternative investment analysts. This designation sets professionals apart in the financial services industry and creates a number of career opportunities.

    Some of the most common positions held by these professionals include:

    • Investment Analyst
    • Investment Manager
    • Portfolio Manager
    • Credit Structurer
    • Risk Analyst
  • Investment Analyst:
    Investment analysts are responsible for reviewing and potentially approving investment products for individuals and companies. A chartered alternative investment analyst, however, works primarily with these specific types of investments. According to PayScale, the average yearly salary for an investment analyst is $65,414.
  • Investment Manager:
    Investment managers are usually in charge of managing money invested by individual investors, institutions, and/or company pension plans. They protect the current investment value while simultaneously adjusting and growing client positions. According to PayScale, the average yearly salary for an investment manager is $101,451.
  • Portfolio Manager:
    Portfolio managers generally take responsibility for investing money for individuals or businesses. They may also handle a variety of financial products, like mutual funds. According to PayScale, the average yearly salary for a portfolio manager is $86,856.
  • Credit Analyst:
    Credit analysts often work to determine the credit worthiness of an individual or business. They look at past credit purchases to determine whether the entity qualifies to receive a loan. According to PayScale, the average yearly salary for a credit analyst is $51,721.
  • Risk Analyst:
    Risk analysts are responsible analyzing data to calculate risks and outcomes. They frequently work for banks and insurance companies, verifying potential clients’ application information and whether or not the risk they are associated with is justified. According to PayScale, the average yearly salary for a risk analyst is $64,249.

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