What is the Difference between the CFA® Charter and CAIA Charter?

There are various financial designations, and two of the most common are the CAIA Charter and CFA charter. If you are considering a career in financial analysis, earning a CAIA Charter or CFA Charter will help you advance your career. Therefore, it is essential to understand what makes them different and the best fit for you.

What is a CFA?

To become a Chartered Financial Analyst, you should complete the CFA curriculum from the CFA institute and gain the required experience in the investment industry. CFA is an internationally recognized qualification for financial analysts.

With a CFA designation, you will focus on understanding financial markets, analyzing various businesses, and advising companies and individuals to invest. CFA charter holders trade securities, manage funds on behalf of their clients to earn revenue. As a result, achieving a CFA designation will help you become an investment analyst, fund manager, portfolio manager, and financial advisor.

What is a CAIA?

The Chartered Alternative Investment Analyst (CAIA) charter is the internationally recognized benchmark for analysis, application, and practice standards in alternative investments offered by the CAIA Association. Alternative investments are not bonds, stocks, and cash. Therefore they include hedge funds, private equity, real assets such as real estate, commodities, natural resources, and intangible assets, and structured products that include credit derivatives and collateralized debt obligations.

What are the requirements for attaining a CFA vs. CAIA Charter?

Requirements for earning a CFA charter are;

1. To enroll in the CFA professional course, you should hold a bachelor’s degree or an equivalent or be in the final year of your undergraduate studies. You are also eligible to register for the CFA program if you have at least 4,000 hours of relevant work experience or 4,000 hours of the combined university and professional experience.
2. Sit for and pass all three levels of the CFA exams.
3. You should agree to abide by the CFA Institute Code of ethics and become a member of the institute by paying the fee.
4. You should provide proof of 4,000 hours of full-time work experience in a position involving decision-making on investments or a product that contributes to the decision-making process. The work experience can be from before or after you did the CFA exam.

Requirements to earn your CAIA Charter are;

1. Enroll for and pass the CAIA exams.
2. Earn a bachelor’s degree or equivalent and one year of professional experience or four years of professional experience without a degree.
3. You should agree to abide by the CAIA Association Code of ethics and become a member of the institute by paying the fee.
4. Submit two professional references to the CAIA Association

What are the exam topics, formats, and pass rates of CFA and CAIA?

If you are considering pursuing a CFA or CAIA charter, and are concerned about the exam formats and the pass rates, here is all you need to know:

The CFA charter curriculum has three levels and covers a broader range of topics on financial analysis. The core topics in CFA include; ethical and professional standards, quantitative methods, economics, financial reporting and analysis, corporate finance, equity investments, fixed income, derivatives, alternative investments, and portfolio management. The CFA Institute recommends putting in at least 300 hours of study on each level.

Due to the postponed 2020 exams, the CFA Institute announced that there would be additional exam windows for all levels in 2021. CFA level II will have four test windows, while level II and level III will have two exam windows. 2019 is the last year where complete data is available since the CFA Institute postponed the 2020 exams due to the global Covid 19 pandemic. The CFA Institute provided the following data for the exams carried out in 2019:

• Level I (June) – 41%
• Level I (December) – 42%
• Level II – 44%
• Level III – 56%

On the other hand, the CAIA curriculum has two levels; level I questions are multiple-choice, while level II has a multiple-choice section and a constructed response section. In addition, exam windows for both CAIA exam levels are March and September. The average exam pass rates for the CAIA level I were 52% and 65% for level II in 2020.

The core topics for the CAIA exams are private equity, real assets, and commodities, professional standards and ethics, structured products, hedge funds, introduction to alternative investments, risk management, and portfolio management. In preparation for your exams, the CAIA Association recommends that you should put in at least 200 hours of study at each level.

What are the similarities between CFA and CAIA?

The first similarity is that CFA and CAIA charters are credentials earned by financial analysts, and their curriculum is in levels. Secondly, you should pass each level before advancing to the next one. The common topic in CFA and CAIA is professional standards and ethics. Additionally, you will need to spend a lot of time studying, practicing, and having in-depth knowledge of alternative investments.

What are the differences between CFA and CAIA?

The main difference between the CFA Charter and the CAIA Charter is that CFA focuses on a broader range of financial analyses while the CAIA charter is more focused. Additionally, while the CFA curriculum has three levels, the CAIA exam has two levels.

Which is better suited for me?

The choice of charter you choose to pursue depends on the direction you want to take as a financial analyst. Earning a CFA charter is ideal if you want to become a risk manager, financial analyst, portfolio manager, consultant, research analyst, or corporate financial analyst.

On the other hand, the CAIA is ideal if you would like to specialize in unconventional investments. However, you do not have to choose at all, and you can pursue both charters.

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