Posted by: Kaplan Schweser
Published: December 24, 2019
How difficult is the CAIA® exam? Slightly more than half of those who take the exam pass it, which is a better average than the CFA® Program exam and the FRM® exam. However, taking both levels of the exam isn’t exactly a walk in the park. Pass rates have been declining since the exam was first offered, and only 40% of those who register for the exam end up passing both levels. This article will help you understand the challenge the exam presents and how to improve your odds of success.
The Level I CAIA exam consists of 200 multiple-choice questions. The exam length is four hours. There are 100 questions in the first two hours, followed by a break, and then 100 more questions in the last two hours. 70% of the Level II exam weight consists of 100 multiple-choice questions. The remaining 30% consists of three sets of constructed-response (essay) questions. These questions test your practical application of the knowledge you’ve gained to realistic scenarios. To learn more about each level of the exam, check out our FAQ for Level I and FAQ for Level II.
The pass rates for the September 2019 CAIA exam were 52% for Level I and 64% for Level II. The pass rates have been on a steady decline for the past decade. (This pass rate information is courtesy of Wikipedia.) More candidates are taking the exam than previously, which is one reason the pass rate is declining, but the other is that the exam is becoming more challenging.
The topics covered by both levels of the CAIA exam can change from year to year because the world of alternative investments is fluid. Here are the 2020 weights and topics for Level I:
|Professional Standards and Ethics||15%–25%|
|Introduction to Alternative Investments||20%–28%|
|Real Assets including Commodities||11%–17%|
The Level I exam is computerized, and questions are served up in topic batches, although you won’t get all questions on one topic at once. Now that you know the format, you can see that you aren’t likely to pass the exam if you don’t pass the topics with weights over 15%. Based on this table, the topics you really want to get right are Professional Standards and Ethics and Introduction to Alternative Investments.
The 2020 topics and weights for Level II are:
|Professional Standards and Ethics (Structured Response Only)||10%|
|Current and Integrated Topics (Structured Response Only)||10%|
|Asset Allocation and Institutional Investors||8%–12%|
|Hedge Funds and Managed Futures||18%–22%|
Level II is also computerized and a certain percentage is solely dedicated to the constructed response questions. Hedge Funds and Managed Futures is the topic with the heaviest weight, but overall, the weights are distributed fairly evenly. Level II is truly designed to assess how well you apply your knowledge to real-life situations. So it is essential you have a firm grasp on all the topics to be successful.
The CAIA exam requires a significant investment of time to be successful. But most of the time, failing a level of the exam is the result of study mistakes and insufficient prep. These tips will help you develop the knowledge and confidence necessary to pass Level I and Level II of the CAIA exam: