The Basics of the CAIA for Alternative Investments

For those who work in, or have aspirations of one day working in the world of finance, chances are you're familiar with the Chartered Financial Analyst (CFA) designation already. It has arguably become the most recognizable and sought after professional designation in the industry.

Meanwhile, as investment and interest in alternative assets continues to grow in the financial community, individuals with advanced expertise in this area are in ever-increasing demand. The Chartered Alternative Investment Analyst designation (CAIA) is a program that focuses on these alternative investment asset classes, which includes private equity, hedge funds, commodities and real estate, among others. Alternative assets can be considered as investments and asset classes that do not fall under the general umbrella of equity or fixed income.

Here, we will introduce you to the CAIA program and information related to obtaining the CAIA designation.

What Is the CAIA?

The CAIA Association was founded in 2002 by the Alternative Investment Management Association and the Center for International Securities and Derivatives Markets, and offered the first CAIA exam in February 2003. The CAIA designation is awarded by the CAIA Association to those who completed the CAIA program's stated requirements.

In order to obtain the designation, candidates must: hold a U.S. Bachelor's degree (or equivalent); successfully pass both the Level I & II exams; have more than one year of qualifying work experience (or four years of professional experience); maintain annual membership dues and abide by the membership agreement.

The program itself is based upon self-directed learning, like most professional designations, meaning that it is up to the candidate to decide what and how much to study, based upon the guideline curriculum and required readings given by the CAIA Association. Probably the best way to learn about obtaining the designation itself would be to go through the Level I CAIA exam and the topics covered within it, and touch upon the Level II exam a bit as well.

What Topics Are on the Level I Exam?

Both the Level I & II exams are offered twice a year, in late February/March and September, and students have the option of booking their exam within a window of a few weeks before the exam periods start.

The Level I exam consists of 200 multiple choice questions and aims to take candidates' knowledge of the topics and build upon what one should have learned during their undergraduate studies.

The exam covers seven distinct topics, all of which share a designated weighting on the exam:

Professional Standards and Ethics

This section covers many of the same topics that would be covered in the CFA curriculum, such as professionalism, duties to employers and clients, and conflicts of interest. Much like the CFA Institute, the CAIA Association places a serious emphasis on professional standards and ethics, and drills home that obtaining the CAIA designation and membership comes with strong professional and ethical guidelines.

Introduction to Alternative Investments

This section covers the basics of the alternative investment space. It includes understanding the complexities of alternative asset classes, quantitative techniques, and the unique aspects of alternative investments.

Real Assets

The real assets section introduces students to the different types of real investments, such as real estate investment trusts (REITs), direct investment in real estate and real estate valuation. Additionally, understanding the role of the National Council of Real Estate Investment Fiduciaries (NCREIF) and its indexes are important aspects to this section.

Hedge Funds

Hedge Funds cover a wide range of hedge fund-related topics and more than likely acts as an introduction to most on the hedge fund industry. Candidates will learn about the different types and styles of funds, how their performance can be measured, fee structures, and the inherent risks associated with hedge fund investment. Additionally, studies on well-known hedge fund collapses are part of the section.

Private Equity

Next, the private equity (PE) section gets into topics such as venture capital, leveraged buyouts (LBOs), and mezzanine debt. Additionally, the readings look at trends in the industry and the economics of private equity investments, namely the role of debt.

Structured Products

This topic covers all things credit, especially collateralized debt obligations (CDOs). In this section, candidates are expected to understand the basis behind CDO valuation and the different underlying assets a CDO can be based on, such as distressed debt and arbitrage CDOs. This is typically one of the most difficult sections for students on the exam, so a candidate may need to pay extra attention to this topic.

Risk Management and Portfolio Management

In this final topic, the candidates will get a greater understanding of key risk metrics and their effect on building an investment portfolio.

What Topics Are on the Level II Exam?

The Level II exam covers most of the same areas of study as Level I, but challenges test-takers to take the knowledge they've gained from Level I to a deeper level of understanding. Additionally, sections found on the second exam that are not present on the first include Core and Integrated Topics; Asset Allocation and Institutional Investors, and Commodities.

While only consisting of 100 multiple choice questions, the Level II exam also includes three sets of written essay questions, which will challenge a candidate's full understanding of the material. However, if you put in the required time and effort, you will more than likely be rewarded for your hard work.


With topics of study ranging from professional conduct standards, quantitative measures, financial reporting, and portfolio management to name a few, receiving a CFA designation is a long and challenging endeavor. Becoming a charter holder brings with it a level of achievement and hopefully opens doors in one's profession that may not have been there prior.

That being said, the CFA charter is truly an all-encompassing designation that focuses more on portfolio management at its highest level. However, for individuals looking to achieve a more expert-level grasp on the area of alternative investments, the CAIA should be considered, either as a stand-alone designation or to augment one's CFA charter.

The Bottom Line

Upon becoming a member of the CAIA, members get to enjoy many benefits associated with the designation. First and foremost, the CAIA designation itself is viewed as the standard for alternative investment professionals and thus CAIA members can be found in positions in many different areas, including hedge funds, PE funds, investment banks, and commodity desks.

Also, the membership brings with it access to related events and conferences, where members can share ideas with like-minded professionals and build upon their knowledge of alternative investments. Like most highly-regarded professional designations, the perks associated with membership (both professional and otherwise) often are a large part of the reward.

This has just been an overview of the CAIA program and what individuals new to the designation can expect from it. For more information, visit the CAIA website to get a complete breakdown of the program and the CAIA Association itself.

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  1. Chartered Alternative Investment Analyst Association. "CAIA Exam Curriculum."

  2. Chartered Alternative Investment Analyst Association. "Candidate Handbook," Page 6.

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