It can be difficult for finance professionals to keep up with the alphabet soup of potential professional designations, especially when many programs seem to cover much of the same information. Such is the case between the Chartered Alternative Investment Analyst (CAIA) and the Chartered Financial Analyst (CFA), two attractive options for those committed to a career in the field of financial analysis.

Generally speaking, the CFA covers a broader range of financial topics and boasts a larger membership base. The CAIA can still be a useful title for the right professional, but its application and focus are narrower.

Similarities

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. Most of the similarities between the two are superficial; content and future applications have less in common.

It takes a long time and a lot of money to complete each program. The CAIA, administered by the CAIA Association, requires an estimated 200 hours of study time and $2,900 in standard registration and exam fees. The CFA Institute recommends 250 hours of study and charges $2,350 for its exams.

Covered Topics

There isn't anything covered in the CAIA coursework that isn't present in the CFA material, while the CFA covers much more than just alternative investments. This makes the CFA comparatively broad and shallow, whereas the CAIA is very focused and deep. Both tests cover professional standards and ethics.

Specific topics for the CAIA include alpha and beta drivers, real estate, hedge funds, commodities, managed funds, private equity, derivatives, funds of funds, and risk management. CFA topics include general economics, financial reporting and analysis, corporate finance, equity investments, fixed income, portfolio management and quantitative analysis.

Exam Frequency and Difficulty

The average CAIA applicant takes and passes the Level 1 and Level 2 exams in two years. Each test is administered twice per year, and pass rates are high for both Level 1 (63% in 2017) and Level 2 (59%).

CFA exams are more difficult and are spread further apart. There are three tests, Levels 1-3, and only Level 1 is administered more than once per year. The most expedient path to earning a CFA takes three years, but most take longer because of the exam difficulty. Only 43% of CFA test takers pass Level 1, with 47% passing Level 2 and 54% passing Level 3.

Required Education & Work Experience

There are no prerequisites to take the CAIA exam, although it's best to at least have a working knowledge of financial and investment concepts. After passing the Level 1 and Level 2 exams, a bachelor's degree and one year of relevant work experience – or else four years of relevant experience without a degree – are required to claim the CAIA title officially.

The CFA Institute is more selective about its designation. No applicant may take the Level 1 exam without a bachelor's degree, or without at least being in the final year of a bachelor program, or without having any combination of work experience and college equal to four years. Once an applicant passes the Level 3 exam, he must have four full years of relevant work experience before earning the CFA title.

The Bottom Line

Very few career investment professionals would be ill-served with a CFA title next to their names. Some financial advisors and brokers can survive without them, as can certain analysts, but every analytical position can benefit from the CFA designation. Certain occupations, such as portfolio managers or analysts at mutual funds, 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, CAIA does have two very specific, comfortable and lucrative homes: private equity and hedge funds.

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