Chartered Alternative Investment Analyst
The Chartered Alternative Investment Analyst (CAIA) course and qualification is a two tier examination process with a Level 1 and Level 2 exams, both of which must be completed for you to hold the CAIA charter. The qualification differs from other investment and finance analyst qualifications, as it focuses on the alternative investment market.
The Level 1 exam covers a number of different investments including:
• real estate
• alpha and beta drivers
• managed futures
• credit derivatives, and
• private equity
The exam itself consists of 200 multiple choice questions, and the entire Level 1 exam session lasts for five hours. This does include optional comment periods and breaks. You should aim to complete all questions on the paper, the pass mark for which is 70 per cent.
The different syllabus areas are weighted by the CAIA, and the Private Equity section of the paper is given a weighting of between five to ten per cent of the total questions.
Level 1 Private Equity Exam
The syllabus for the Private Equity module is set out in detail by the CAIA and covers the following areas:
• knowledge of the terminology of private equity
• venture capital
• leveraged buyouts
• merchant banking
• management buyouts
• mezzanine debt
• debt securities
• debt covenants
• risk and return profile of venture capital
• distressed debt, and
• portfolio companies
A full copy of the syllabus can be downloaded from the website of the CAIA.
Recommended reading for the course includes - Investments by Bodie, Kane and Marcus and Quantitative Investment Analysis by DeFusco, McLeavey and Pinto.
A typical Level 1 Private Equity question will supply you with a data set and then ask, "Why did the supply curve shape for venture capital funds alter after 1979?" after which you would be offered four answers to choose from.
You will not be supplied with an equation sheet in the exam and will therefore be required to memorise the necessary equations. The CAIA has a calculator policy detailing the model of calculator you are allowed to bring in to the exam, and the approved models are the TI BA II, or the HP 12C.
Benefits of CAIA
The CAIA qualification is demanding, with the Level 1 exams alone having a recommended study time of around 200 hours. There are significant benefits that attaining the CAIA qualification can confer on those seeking investment analyst jobs. Simply holding the qualification will mark an applicant out from other chartered financial analysts applying for the same job.
This qualification is increasingly in demand in a number of industries, especially the hedge fund business as was reported by a hedge fund review in 2011. The area of private equity is also becoming increasingly important, with over 20% of CAIA members surveyed believing that it would have the largest effect on alternative investments in the coming year.
The CAIA qualification can either be studied as a distance learning course, or in the UK you can attend classroom based courses with Kaplan Financial. Please speak to a course advisor for full details of their CAIA course.