People at computers wondering how hard the CAIA Exam is

Posted by: Kaplan Schweser
Updated: February 9, 2021

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.

About the CAIA®Exam Format

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.

CAIA® Exam Pass Rate

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.

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CAIA® Exam Topics

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 current weights and topics for Level I:

TopicExam Weight
Professional Standards and Ethics15%–25%
Introduction to Alternative Investments20%–28%
Real Assets including Commodities11%–17%
Hedge Funds12%–20%
Private Equity11%–17%
Structured Products10%–14%

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:

TopicExam Weight
Ethics, Regulation, and ESG (Constructed Response Only)10%
Institutional Asset Owners and Investment Policies8%–12%
Risk and Risk Management8%–12%
Accessing Alternative Investments8%–12%
Methods for Alternative Investing8%–12%
Due Diligence and Selecting Strategies8%–12%
Volatility and Complex Strategies8%–12%
Current and Integrated Topics (Constructed Response Only)10%

Level II is also computerized and a certain percentage is solely dedicated to the constructed response questions. Level II is truly designed to assess how well you apply your knowledge to real-life situations; therefore, the topics are fairly evenly weighted. So it is essential you have a firm grasp on all the topics to be successful.

CAIA® Exam Study Tips: How to Increase Your Odds of Success

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:

  • Put in the study time: CAIA Association says candidates should study at least 200 hours for each exam, or 400 hours total. Don’t take this suggestion lightly. You have a lot of material to cover. Starting early will help ensure you leave yourself enough time to master it.
  • Don’t rely on cramming: Candidates who do not manage to dedicate enough time to prepare for the exam might be tempted to resort to cramming. Time and time again, it’s been proven that the best last minute exam prep activities are light review and a good night’s sleep. Cramming is not in the recipe for CAIA exam success.
  • Develop and follow a study plan: A well-thought out study plan is essential. The study plan should serve as a map for going through the entire curriculum and should incorporate classes, study notes, practice questions, mock exams, and final review to reinforce the learning process.
  • Learn how to apply your knowledge to real life scenarios: Memorizing vocabulary and concepts will not be enough to pass both levels of the CAIA exam. Both test your ability to apply what you know to situations you are likely to encounter when serving clients. So keep that in mind and try to think how you might use the concepts you’re learning about.
  • Practice, practice, practice: There is no better way to build your confidence ahead of the CAIA exam than by doing practice questions. Practicing what you have learned is essential for retaining and assessing knowledge, as well as being comfortable answering the kinds of questions you’ll encounter on exam day. Practice also helps you truly assess your comprehension of critical concepts and identify and address weaknesses.

Ready for the Challenge?

If you’ve decided the CAIA exam is something you want to take on, check out our CAIA exam prep study packages for all learning styles now. Or, learn more about why you should pursue it here.

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