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I passed the CAIA Level II Exam!

How I prepared (and passed) the CAIA Level II Exam

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Finally, the results are up! I passed the CAIA Level II Exam !!

It all started at the 69th CFA Annual Conference in Montréal back in 2016.  I met William Kelly (President and CEO of CAIA Association) and he encouraged me to pursue the CAIA Program. I played with the idea for some time and finally, CAIA Institute launched the Stackable Program for CFA Charterholders. Among other things, the CAIA Level I Exam was waived. This was the sign I was waiting for! I couldn’t resist the opportunity, it was too good to miss!

First, Why I did it?

After going through the CFA Program in 2011, I thought that was it, no more exams for me! But, as you can imagine, our industry is always evolving and new products, strategies, and regulations come into place. The Alternative Investments industry is growing in Mexico and the CAIA Charter is recognized by the Mexican pensions regulator, CONSAR. Also, being a global Charter, I am confident it will improve my chances of landing a job elsewhere (my objective: Canada).

CAIA Level II Exam Contents

These were the most interesting subjects:

Hedge Funds and Managed Futures

  • Managed Futures, CTAs
  • Relative Value Strategies, convertible arbitrage
  • Hedge Funds – vs. Directional and Credit Strategies
  • Volatility, Correlation, and Dispersion Products and Strategies
  • Hedge Fund Replication
  • Funds of Hedge Funds and Multistrategy Funds
  • Hedge Fund Operational Due Diligence

Institutional Investors

  • Asset Allocation Processes and the Mean-Variance Model
  • Tactical Asset Allocation, Mean-Variance Extensions, Risk Budgeting, Risk Parity, and Factor Investing
  • The Endowment Model, Sovereign Wealth Funds and Family Offices, Pension Funds

The material covered also Private Equity, Real Assets, Intellectual Property (how to invest in Art and Movies, interesting), Structured Products, Commodities. Among the current readings, Blockchain was a good introduction to Cryptocurrencies and the associated tech. These readings help the CAIA Level II Curriculum to be at the edge of trends.

Now, here is how I prepared:

Time spent

The whole curriculum and readings were 1,200 pages long, in total. Considering my reading speed of 5 pages/hr (including taking personal notes), I spent a total of 240 hrs in the material. Relative to each CFA Exam which are 3,000 pages each and took me 300-350 hrs to study, this time it was a slower pace. Maybe it was that some concepts were new to me, or maybe I got rusty over the years. One thing that bothered me from time to time was: “as we saw in the CAIA Level I book”, “the basics were covered in Level I”. It made me wonder if I had the right background knowledge for the exam.

Notes. Many handwritten notes.

As usual, I used the LOS to print a notebook, with enough spacing for notes. I am a visual person and writing and drawing help me remember easier.

CAIA Level II Notes

CAIA Level II Notes

I don’t like writing on books so this time I used highlighting tape and LOTS of post-it notes. Exercises were in the post-its, so it was easy at the end to take them all and paste them for review.

Highlighting and notes

Highlighting and notes

Also, I recycled my Ethics mindmaps I used to prep for my CIPM Exam:

CIPM Ethics MindMap

CIPM Ethics MindMap

Recordings for the Road

Every day my commute is around 2.5 hrs (I know, It sucks!). So I decided to try something new and seize this time: voice notes. I took my notes and started recording them with my phone. Very basic and nothing fancy. Each chapter was 20-30 min long, so I could listen to four to five chapters every day.  Heres a short soundbite of Chapter 8: Private Equity Benchmarks (Spanglish):

This method helped me first to organize my thoughts and trying to figure out my notes. Also, reading out loud is an excellent way to review, as visual and listening learning is combined.

(Not enough) practice exercises.

Mock exam: I did the mock exam included with the exam fee. It helped me realize that my weak spot was the formulas. But, my time was running out and I couldn’t do many exercises from the CAIA Workbook. Ex-post, I realize it was a good material that I didn’t take advantage from.

What about the Exam?

As you may know, CAIA regulations don’t allow for exam content disclosure. But, I can say that It was fair, straightforward, based on the material and a little bit easier than a CFA Exam. The second section is open questions and at first, I thought 60 minutes were more than enough to complete. But in the end, Ethics questions were more difficult than what I had in mind,  made me go over and over my answers, several times, so I just finished within the allotted time.

Something I missed from the results email was the overall performance. I was used to getting a subject by subject performance percentile in CFA Exams. With CAIA, I don’t really know how well I performed in each section.

Now I found my performance results at my CAIA Member website. Actual scores are not released. 62% of candidates of the Fall 2018 CAIA Level II exam passed. Performance is compared to the lower quartile of those passing candidates and reported in categories. For each topic, my relative performance was determined by comparing my performance (my Candidate Score, or CS) to the average score of the reference group (x), and the standard deviation of the scores of the reference group (σ).  For example, a “comparable” results can be interpreted as x – 0.5×σ < CS ≤ x + 0.5×σ and Stronger means my was one and a half standard deviation above the comparison group mean, CS > x + 1.5×σ.

My performance in Hedge Funds was way below the average relative to the lowest quartile of passing candidates. I knew this was the topic with more weight, so I this was the first one I read, back in June. For all other topics, I was surprised I was above the average.

CAIA Candidate Performance Report

CAIA Candidate Performance Report

Thanks and Acknowledgments

First, thanks to my family, Rosy, and Diego, who each time I get enrolled in some certification they support me. It’s not easy for the family, as most of my free time goes to prep. Secondly, thanks to all my CFA Charterholder colleagues (Sameer S, Alex H, Javier D) who also hold the CAIA and gave good advice and tips. I’d also like to thank the CAIA Association for letting me participate in this pilot Stackable Program for CFA Charterholders.

Estrategia de estudio para el examen CFA diciembre 2014

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Uno de los grandes retos de los exámenes CFA es la gran cantidad de información que hay que revisar y recordar. Puedes utilizar varias estrategias de estudio, pero desde mi punto de vista, si empiezas con anticipación, la mejor manera de prepararse es el currículum oficial. Por definición es el material más completo.

A continuación presento el desglose de páginas de cada lectura, sin contar los ejercicios, el resumen ni secciones opcionales.

Desglose de las lecturas del Curriculum CFA Nivel 1 Diciembre 2014

TEMA
PÁG
STUDY
SESSION 1
Ethical and Professional Standards
Reading 1
Code of Ethics and Standards of Professional
Conduct
13
Reading 2
Guidance for Standards I–VII
130
Reading 3
Introduction to the Global Investment Performance
Standards (GIPS)
4
Reading 4
The GIPS Standards
36
STUDY
SESSION 2
QUANTITATIVE METHODS BASIC CONCEPTS
Reading 5
Time Value of Money
36
Reading 6
Discounted Cash Flow Applications
20
Reading 7
Statistical Concepts and Market Returns
70
Reading 8
Probability Concepts
39
STUDY
SESSION 3
QUANTITATIVE METHODS APPLICATION
Reading 9
Common Probability Distributions
38
Reading 10
Sampling and Estimation
26
Reading 11
Hypothesis Testing
37
Reading 12
Technical Analysis
53
STUDY
SESSION 4
ECONOMICS: MICROECONOMIC ANALYSIS
Reading 13
Demand and Supply Analysis: Introduction
48
Reading 14
Demand and Supply Analysis: Consumer Demand
28
Reading 15
Demand and Supply Analysis: The Firm
47
Reading 16
The Firm and Market Structures
46
STUDY
SESSION 5
ECONOMICS: MACROECONOMIC ANALYSIS
Reading 17
Aggregate Output, Prices, and Economic Growth
69
Reading 18
Understanding Business Cycles
47
Reading 19
Monetary and Fiscal Policy
63
STUDY
SESSION 6
ECONOMICS: ECONOMICS IN A GLOBAL
CONTEXT
Reading 20
International Trade and Capital Flows
54
Reading 21
Currency Exchange Rates
55
STUDY
SESSION
FINANCIAL REPORTING AND ANALYSIS AN
INTRODUCTION
Reading 22
Financial Statement Analysis: An Introduction
30
Reading 23
Financial Reporting Mechanics
34
Reading 24
Financial Reporting Standards
39
STUDY
SESSION 8
FINANCIAL REPORTING AND ANALYSIS INCOME
STATEMENTS, BALANCE SHEETS, AND
CASH FLOW STATEMENTS
Reading 25
Understanding Income Statements
52
Reading 26
Understanding Balance Sheets
45
Reading 27
Understanding Cash Flow Statements
41
Reading 28
Financial Analysis Techniques
63
STUDY
SESSION 9
FINANCIAL REPORTING AND ANALYSIS
INVENTORIES, LONG-LIVED ASSETS,  
INCOME TAXES, AND NON-CURRENT LIABILITIES
Reading 29
Inventories
19
Reading 30
Long lived assets
37
Reading 31
Income Taxes
29
Reading 32
Non-Current (Long-Term) Liabilities
43
STUDY
SESSION 10
FINANCIAL REPORTING AND ANALYSIS
EVALUATING FINANCIAL REPORTING  
QUALITY AND OTHER APPLICATIONS
Reading 33
Financial Reporting Quality: Red Flags and
Accounting Warning Signs
17
Reading 34
Accounting Shenanigans on the Cash Flow
Statement
8
Reading 35
Accounting Shenanigans on the Cash Flow
Statement
42
STUDY
SESSION 11
CORPORATE FINANCE
Reading 36
Capital Budgeting
23
Reading 37
Cost of Capital
31
Reading 38
Measures of Leverage
23
Reading 39
Dividends and Share Repurchases: Basics
22
Reading 40
Working Capital Management
40
Reading 41
The Corporate Governance of Listed Companies:
A Manual for Investors
40
STUDY
SESSION 12
PORTFOLIO MANAGEMENT
Reading 42
Portfolio Management: An Overview
32
Reading 43
Portfolio Risk and Return: Part I
57
Reading 44
Portfolio Risk and Return: Part II
42
Reading 45
Basics of Portfolio Planning and Construction
32
STUDY
SESSION 13
EQUITY MARKET ORGANIZATION, MARKET
INDICES, AND MARKET EFFICIENCY
Reading 46
Market Organization and Structure
58
Reading 47
Security Market Indices
28
Reading 48
Market Efficiency
25
STUDY
SESSION 14
EQUITY ANALYSIS AND VALUATION
Reading 49
Overview of Equity Securities
30
Reading 50
Introduction to Industry and Company Analysis
46
Reading 51
Equity Valuation: Concepts and Basic Tools
35
STUDY
SESSION 15
FIXED INCOME BASIC CONCEPTS
Reading 52
Fixed-Income Securities: Defining Elements
39
Reading 53
Fixed-Income Markets: Issuance, Trading,
and Funding
41
Reading 54
Introduction to Fixed-Income Valuation
55
STUDY
SESSION 16
FIXED INCOME ANALYSIS OF RISK
Reading 55
Understanding Fixed-Income Risk and Return
45
Reading 56
Fundamentals of Credit Analysis
61
STUDY SESSION 17
DERIVATIVES
Reading 57
Derivative Markets and Instruments
48
Reading 58
Forward Markets and Contracts
13
Reading 59
Futures Markets and Contracts
23
Reading 60
Option Markets and Contracts
36
Reading 61
Swap Markets and Contracts
17
Reading 62
Risk Management Applications of Option Strategies
18
STUDY
SESSION 18
ALTERNATIVE INVESTMENTS
Reading 63
Introduction to Alternative Investments
57

Esto da un total de: 2,476 páginas !

Es crítico llevar una disciplina de estudio constante  para terminar de leer el material a tiempo. Un amigo me dio la idea de llevar en una hoja de cálculo de Excel el registro de las páginas leídas diariamente, de tal forma que si algún día se atrasaba, él sabía que tenía que reponer al otro día lo faltante. Puedes copiar la tabla de arriba al Excel para iniciar tu registro.

Suponiendo que inicias esta semana tu preparación, te quedan un total de 145 días para el examen. Para leer todo el material, requieres leer diariamente 17 páginas. Suponiendo que tardas 5 minutos en leer cada página, cada día tienes que leer una hora y media, y te tomará aproximadamente 206 horas estudiar los seis libros del curriculum. Esto sin contar el tiempo que debes dedicar a hacer ejercicios.

Recomendaciones de Estudio

  • Inscríbete al examen con anticipación. Además de que resulta más barato, tienes acceso a los libros en formato e-book y puedes iniciar inmediatamente tu preparación.
  • Establece una meta semanal de estudio, por ejemplo, leer 120 páginas.
  • Aprovecha los sábados y domingos para hacer ejercicios de repaso y recuperarte de cualquier atraso en la lectura. Yo estudiaba 5 horas el sábado y 5 horas el domingo, ya que entre semana me atrasaba por los compromisos laborales.
  • Utiliza los exámenes de prueba que están incluidos en tu cuota de examen. Vas a recibir un email del CFA Institute cuando estén disponibles.

Siguientes pasos

Si quieres conocer más sobre el Programa CFA, puedes consultar las Preguntas Frecuentes (FAQ) del Programa CFA.

Regístrate al examen. Antes del 20 de Agosto 2014, la inscripción al examen cuesta $1,240 USD. Después y hasta la última fecha de inscripción, 17 de Septiembre 2014, cuesta $1,610 USD. Te recomiendo inscribirte con anticipación, considerando la cantidad de material que tienes que estudiar.