CAIA vs. CFA: An Overview

It can be challenging for finance professionals to keep up with the alphabet soup of potential professional titles. That is especially true when many programs seem to cover much of the same information. Such is the case when comparing the designations of Chartered Alternative Investment Analyst (CAIA) and Chartered Financial Analyst (CFA). These are both attractive options for professionals committed to a career in the field of financial analysis.

CFA and CAIA certifications are designed for analytical professionals. Furthermore, they both require passing a series of exams from a reputable organization in the industry. However, most of the similarities between the two are superficial. Their content and future applications have less in common.

Generally speaking, the CFA covers a broader range of financial topics and has a larger membership base. The CAIA is a useful title for some professionals, but its application and focus are more narrow.

Key Takeaways

  • CFA and CAIA exams are both designed for analytical professionals, and both require passing a series of exams from a reputable organization in the industry.
  • Since the CAIA covers investments that aren't equities or bonds, the title could be considered superfluous for many financial professionals.
  • Some financial advisors and brokers can survive without it, as can certain analysts, but most analytical professionals benefit from the CFA designation.

CAIA

It takes a long time and a substantial investment of money to complete each program. The CAIA requires an estimated 200 hours of study time per level for a total of 400 hours and $2,900 in standard registration and exam fees.  The CAIA Association administers the program and sets its basic requirements. Data show that 75 percent of candidates who earn their CAIA charter do so in 12 to 18 months.

Specific topics for the CAIA include manager research and due-diligence techniques specific to hedge funds and private equity. The exam also covers asset allocation models that account for the illiquidity and fat tails of alternative investments. Other topics include the implications of appraisal-based pricing of real estate and private equity for asset allocation and risk management. Investments in areas such as intellectual property, insurance-linked securities, and equity-linked structured products are also covered.

There are no prerequisites for taking the Level 1 and Level 2 CAIA exams. However, it is best to have a working knowledge of financial and investment concepts. After passing the exams, a bachelor's degree and one year of relevant work experience are enough to claim the CAIA title. Professionals without the degree who have passed the exams can also get the title after four years of related experience.

CFA

The CFA Institute reports an average of 300 hours of study per level (900 hours for all three) and charges a total of $3,450 for its exams.  The CFA test material covers much more than just alternative investments, but it devotes far less time to that topic. That makes the CFA broader and more shallow, whereas the CAIA is very focused and deep. Both tests cover professional standards and ethics. 

CFA topics include general economics, financial reporting and analysis, corporate finance, equity investments, fixed income, portfolio management, and quantitative analysis.

CFA exams are more challenging and spread further apart. There are three tests, which are called Levels 1, 2, and 3. Only Level 1 is administered more than once per year. Most professionals take three years or more to earn the CFA designation because of the difficulty of the exams. Only 43% of CFA test takers pass Level 1, with 45% passing Level 2, and 56% passing Level 3.

The CFA Institute is more selective about its designation. Before taking the Level 1 exam, applicants must do one of three things. They can get a bachelor's degree, reach the final year of a bachelor's program, or obtain a combination of work experience and college equal to four years. Once applicants pass the Level 3 exam, they must have four full years of relevant work experience to earn the CFA title.

Special Considerations

Most career investment professionals would benefit from a CFA title next to their names. However, financial advisors and brokers can survive without it, as can certain analysts.

Some positions, such as portfolio manager and mutual fund analyst, essentially require applicants to be CFAs.

Since the CAIA covers investments that aren't equities or bonds, the title could be considered superfluous for most financial professionals. However, the CAIA does have two specific and lucrative homes, namely private equity and hedge funds. The CAIA is useful in large part because alternative investments are an essential part of many institutional investment portfolios. The CAIA is relevant to financial professionals who want to focus on alternative investments at pension funds, foundations, and sovereign wealth funds.