Chartered Financial Analyst (CFA) Program
Chartered Financial Analyst (CFA) is globally one of the most recognised, respected and valued credentials in the field of investment management and investment banking. It is a designation which is awarded by the CFA Institute to candidates with proven competence in and sound knowledge of investment analysis and wealth management. To earn the CFA designation, charter holders must demonstrate expertise in financial research, portfolio management, investment consulting, risk analysis and risk management. The CFA course imparts in-depth training on building a holistic approach for investment management and advisory. As of March 2022, there are globally more than 1,75,000 charterholders in 164 countries.
CFA Program Journey
To complete the CFA Program, the candidate needs to clear the three levels of the CFA exam –
CFA Level 1, CFA Level 2 and CFA Level 3. Once the CFA program aspirant clears CFA Level 3, he/she can apply for the CFA Charter provided he / she has at least 4000 hours of relevant experience completed in not less than 36 months. Relevant experience for obtaining the CFA charter is defined as experience directly related to the investment decision-making process or producing a work product that informs or adds value to that process.
All about the CFA Program | CFA Course | Opportunities
CFA Course Structure:
The CFA course is spread across 3 levels:
These three levels of the CFA Program tests the candidate’s knowledge and proficiency in understanding fundamentals of investment tools, valuing assets, portfolio management and wealth planning. Across the three levels the program aspirant is tested on the following 10 topics:
- a. Quantitative Methods is the backbone of all analysis & analytics – financial & investment analysis, valuation and corresponding decision making, data analytics. Statistics finds wide application in finance and hence rightfully has overrun this subject area. Application of probability theory, hypothesis testing, regression, time-series analysis and some other elements of econometrics are discussed extensively in this topic area across Level 1 and 2.
- b. Financial Statement Analysis thoroughly delves into understanding of financial statements, application and understanding of financial reporting methodology & standards. Crux is to build analytical capability in analysing financial statements and understanding nuances of accounting play and impact on reporting, ratios and overall interpretation.
- c. Ethical and Professional Standards is at the core of the CFA curriculum. This topic goes deep into bringing to the fore the importance of professionalism and ethical behaviour in the investment management space. While handling an investor’s money or presenting research data, the curriculum focuses on reporting standards viz. CFA Institute Code of Ethics and Standards of Professional Conduct and Global Investment Performance Standards (GIPS®).
- d. Equity Investments discusses the valuation, analysis and understanding of equity markets, indexes, industry, individual companies both from a local and global perspective.
- e. Fixed Income discusses extensively on the fixed income markets, the instruments making the market, fundamentals of bond valuation and pricing parameters – risk and return, securitization and credit analysis.
- f. Economics delves into discussion and understanding of geo-politics, firm & market structure, business cycles, monetary & fiscal policy, inflation & unemployment. Topic coverage includes both micro and macroeconomics.
- g. Derivatives: The fundamental structure of the derivatives market, its pricing and hedging, and trading tactics incorporating derivatives are covered comprehensively in the CFA curriculum. Understanding of derivatives is quintessential for investment management from the perspective of optimizing risk return tradeoff and risk management. Coverage includes basic and advanced understanding and application of forwards, futures & swaps and their derivative structures.
- h. Portfolio Management & Wealth Planning is one of the most critical coverage areas in the CFA curriculum. Coverage includes understanding and building risk – return management framework both from the perspective of individual as well as institutional investors perspective. It combines modern portfolio theory, investing practice, and investment performance assessment.
- i. Corporate Issuers covers capital investment decisions, capital structure policies and dividend policies. The topic aims at building ability to understand and analyse the corporate governance framework and its integration with stakeholder management.
- j. Alternative investments: Topics like hedge funds, private equity, real estate, commodities, infrastructure, and other alternative investments are discussed, including strategies, sub-categories, potential benefits and dangers, fee structures, and due diligence when applicable.
CFA Course | CFA Syllabus Explained
The CFA exam across the three levels are held in the computer based test environment at the CFA Institute defined centres. Each level of the exam has two sessions. For evaluation, the candidate must appear for both the sessions.
CFA LEVEL 1:
CFA Level 1 introduces the program aspirant to the basic concepts of investment & portfolio management, asset valuation and financial statement analysis.
Topic Weightage for CFA Level 1:
- a. Ethical and Professional Standards: 15-20%
- b. Financial Statement Analysis: 13-17%
- c. Equity Investments: 10-12%
- d. Fixed Income: 10-12%
- e. Corporate Issuers: 8-12%
- f. Quantitative methods : 8-12%
- g. Economics : 8-12%
- h. Portfolio Management: 5-8%
- i. Derivatives: 5-8%
- j. Alternative Investments: 5-8%
First session tests the candidate on 90 multiple choice questions spread across the following topics:
- Ethics & professional standards,
- Quantitative methods,
- Economics, and
- Financial statement analysis
Second session also tests the candidate on 90 multiple choice questions spread across the following topics:
- Corporate issuers,
- Fixed income,
- Alternative investments and
- Portfolio management
The CFA Level 1 exams are conducted four times in a year
CFA LEVEL 2
After a candidate has cleared the CFA Level 1 exam, he/she has to wait for a minimum period of 6 months before appearing for the CFA Level 2 exam. CFA Level 2 is considered the most difficult exam in the CFA Program. Many term CFA Level 2 as the technical hurdle where the program aspirant is tested intensively on his / her conceptual understanding of the various topics especially understanding in asset valuation, fixed income, derivatives and portfolio management.
Topic Weightage for CFA Level 2:
- a. Ethical and Professional Standards: 10-15%
- b. Financial Statement Analysis: 10-15%
- c. Equity Investments: 10-15%
- d. Fixed Income: 10-15%
- e. Corporate Issuers: 5-10%
- f. Quantitative Methods: 5-10%
- g. Economics: 5-10%
- h. Portfolio Management: 10-15%
- i. Derivatives: 5-10%
- j. Alternative Investments: 5-10%
Unlike CFA Level 1, the program aspirant in CFA Level 2 may be tested across all topics in both the sessions. Each session has duration of 2 hour 12 minutes covering 11 item set questions comprising of 44 accompanying multiple-choice questions.
The CFA Level 2 exams are conducted thrice a year
CFA LEVEL 3
On clearing CFA Level 2, the program aspirant can register for the final hurdle in the CFA Course i.e CFA Level 3. At CFA Level 3, the program aspirant is tested not just on his computational ability but more so on his understanding of the subject matter in his capacity as an investment advisor. Hence the first session of the exam is constructed response and therefore requires the candidate to develop and reproduce his / her understanding of the problem statement rather than chose a response like in a MCQ format test. Primary focus of CFA Level 3 is portfolio management and the candidate’s ability to draw up investment policy statement for an individual and institutional investor. CFA Level 3 also indulges in application and discussion of strategies for managing equity, fixed income and derivatives.
Topic Weightage for CFA Level 3:
- a. Ethical and Professional standards : 10-15%
- b. Equity investments : 10-15%
- c. Fixed Income : 15-20%
- d. Economics : 5-10%
- e. Portfolio Management : 35-40%
- f. Derivatives : 5-10%
- g. Alternative investments : 5-10%
The CFA Level 3 exams are conducted twice a year
ELIGIBILITY CRITERIA to pursue the CFA Program:
To be eligible to pursue the CFA Program, the CFA Program aspirant must fulfil at least one of the following criteria:
- a. A Bachelor’s Degree
- b. Undergraduate Students can register for the CFA program provided they graduate with degree within 11 months from the date they take the CFA Level 1 exam. However, for CFA Level 2 the program aspirant must have completed his graduation before appearing for the exam.
- c. 4000 hours of work experience or combination work experience and higher education acquired over a minimum of three sequential years and achieved by the date of registering for the CFA Level 1 exam.
Special Note on Professional Experience as eligibility for the CFA Program:
- a. Need not be necessarily in investment management or investment management roles
- b. Paid internship / articleship are accepted as professional experience
- c. Work experience with own or family business is accepted as professional work experience for CFA Program eligibility ONLY if it is paid.
The CFA Institute at any point of the CFA journey or even after becoming a CFA Institute member request for proof of education, and/or work experience to be submitted.