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CFA vs. CAIA: What Is the Difference?


A chartered financial analyst (CFA) is a financial advisor who has earned the title of CFA through extra accreditation, including a rigorous three-part test, from the CFA Institute . A Chartered Alternative Investment Analyst (CAIA) specializes in alternative investments such as hedge funds and private equity. This professional must undergo 400 hours of study and pass two rigorous exams to earn the CAIA designation from the Chartered Alternative Investment Analyst Association. We’ll explain what a CFA and a CAIA do, what it takes to earn those designations and the difference between the CFA designation and the CAIA designation. If you are looking for a financial advisor who can help you with your investments, check out SmartAsset’s pro matching tool.

What Does a CFP Do?

A CFA, someone who has passed the three levels of the CFA exam, typically works in an investment analysis role at financial advisor firms, investment firms, insurance companies, banks or investment funds. CFA charterholders strategize investments based on their mastery of financial analytics and market trends. They also maintain a high ethical standard while maximizing your investments and helping you navigate complex financial terrain. They focus on stocks, bonds, mutual funds and exchange-traded funds (ETFs).

What Does a CAIA Do?

chartered alternative investment analyst

A CAIA specializes in evaluating, distributing and managing alternative investments. These securities include the following:

  • Hedge funds
  • Private equity
  • Real estate investments
  • Venture capital
  • Real assets such as commodities futures
  • Funds of funds
  • Derivatives

CAIAs know much more than just how these investments function. They are trained to have a deep understanding of the valuation methods behind alternative investments, as well as the strategies behind analyzing the risk-return profiles of these asset classes.

CAIAs are also equipped to manage these generally risk-oriented investments within portfolios in a professional setting. In fact, some alternative investments are so complex, they are available only to accredited investors and others experienced in the financial markets.

CAIAs typically work in various pockets of the financial services including financial advisory firms and hedge fund companies.

How to Become a CFA

The CFA Institute is a global organization dedicated to promoting a high level of financial literacy and knowledge in the investment and financial planning industries.

To register for the CFA program, you must:

  • Have a bachelor’s degree, be in the final year of completing a bachelor’s degree or have four years of full-time work experience
  • Have an international travel passport
  • Understand English
  • Hold up against certain conduct criteria mandated by the CFA Institute, including past accusations, complaints or convictions
  • Live in an eligible country

Of course, you also must pass all three levels of the CFA exam. The CFA Institute administers each level once a year in June, though Level I is also administered in December. For reference, it’s recommended that you study for at least 300 hours before each level. The standard registration fee is $950 for each level of the exam, but that fee drops to $650 for early-bird sign-ups and rises to $1,380 for late sign-ups. If you register on time and pay the standard rate, the total cost of taking all three sections of the CFA exam is $3,300.

All levels of the CFA exam are similar in that they involve rigorous testing of ethics, investment tools, asset classes, portfolio management and wealth planning. However, all three levels deliberately focus on a different subset of relevant knowledge.

  • Level I exam: This section places a major emphasis on general knowledge and comprehension of various financial and investing subjects. There are two three-hour sessions that include 120 multiple choice questions each.
  • Level II exam: CFA candidates will delve into case studies that are centered more around application and practical analysis. There is a morning session and an afternoon session, with 10 and 11 questions each.
  • Level III exam: This focuses on a synthesis between knowledge and practicality. The morning session is headlined by eight to 2 essay questions, while the afternoon session has another 11 case studies.

Once you complete the necessary requirements, you’ll become a member of the CFA Institute and receive your certification. You must pay annual dues and certify every year that you are adhering to the standards of the CFA Institute.

The CFA Institute releases pass rates for each level of the CFA exam. For June 2019, they go as follows:

  • Level I: 41%
  • Level II: 44%
  • Level III: 56%

How to Become a CAIA

In order to earn the CAIA designation, you must meet the following requirements as set by the Chartered Alternative Investment Analyst Association:

  • Earn a U.S. bachelor’s degree
  • Have at least one year of professional experience
  • Pass two exams administered by the CAIA Association

The CAIA Association administers the Level 1 and Level 2 CAIA exams in March and September. These are generally considered among the most painstaking tests to take in order to earn a financial services designation. Level 1 covers the basics of alternative investments. It also involves the different tools and strategies you can use to evaluate the risk-return characteristics associated with these securities. Level 2 analyzes how you would use what you learned in Level 1 in a professional context to manage portfolios. Both cover professional conduct and other ethical matters you may encounter serving as a CAIA.

The CAIA Association recommends a minimum of 200 hours of study.

According to the organization, 75% of candidates earn their designations within 12 to 18 months. Still, it’s very important to know what to expect.

Before you take these exams, you must pay a one-time program enrollment fee of $400. Below, we list the current registration fees for taking each exam:

Level 1: $1,250
Level 2: $1,250

After passing the CAIA exam, you must pay annual membership dues currently priced at $350. The CAIA provides certain discounts and scholarships to those who register early or can verify membership in partner organizations.

For more information about current fees, scholarships and registration deadlines, visit the official website of the CAIA Association.

CFA vs. CAIA: What Is the Distinction?

If you’re considering a CAIA designation, you may also be thinking about the chartered financial analyst (CFA) designation. Both are prestigious and widely recognized in the industry and can open many doors as far as employment opportunities go.

But the two cover different fields in the global investment universe. A CFA generally focuses on understanding, evaluating and managing traditional securities. These are the ones available to most investors and can include the following:

  • Stocks
  • Bonds
  • Mutual Funds
  • ETFs

As described above, the CAIA covers the space in the investment world that lies just outside this sphere in hedge funds, private equity, real estate investments, venture capital, real assets such as commodities futures, funds of funds and derivatives.

Each designation can also lead to different career paths. CFAs are generally found in traditional financial services roles like portfolio managers and other investment professionals for advisory firms or mutual fund companies. Meanwhile, CAIAs tend to work in more niche spaces such as hedge funds or private equity firms.

But the two often cross paths.

Some argue that the CFA exam stands as the more difficult to pass as it covers more content and historically has reflected lower passing rates than that of the CAIA. Still, nothing stops you from earning both designations in order to expand your expertise as an investment professional.

A chartered alternative investment analyst (CAIA) is a prestigious designation in the financial services industry.

Tips on Finding a Qualified Financial Advisor

  • If you’re looking for a CFA, CAIA or other financial professional to work with, we can help you find one. Use our SmartAsset financial advisor matching tool. After you answer some questions about your circumstances and what you’re looking for, it connects you with up to three local advisors in the area who may help. You can view their profiles and evaluate their credentials before making a decision.
  • In addition to CAIAs and CFAs, there are also certified financial planners (CFPs). These professionals undergo intensive training and testing to provide advice directly to individuals. CFPs are bound by a fiduciary duty, so they must always provide advice in your best interest or face severe penalties. Moreover, many CFPs work on a fee-only basis. This means they don’t receive commissions from financial services firms such as brokerages, so they wouldn’t be incentivised to recommend one product over another for the additional compensation. So keep an eye out for these designations when choosing a financial advisor.

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