Level III Specialized Pathways

For 2025 Level III exams, we will introduce specialized pathways – two new versions of Level III in Private Wealth and Private Markets – while also keeping our traditional Portfolio Management path. Candidates will be able to select a path that teaches content more directly related to their interests and aspirations. The three versions will have a 'common core' of curriculum at Level III, supplemented by specialized content for each pathway.

How are Level III Specialized Pathways Structured?

Candidates will choose one of three "specialized pathway" options at registration. Upon registration, the study materials provided will relate to the selected Pathway. Pathways can not be changed once registration is completed.

65-75% of the Level III exam topic weight will relate to the "Common Core" while the remaining 25-35% will relate to the selected Pathway. Questions related to the selected pathway will be a mix of item-set and essay just as for the common core.

There will be a single, mandatory 10-15 hour Practical Skills Module for Level III starting in this same window. It will focus on Portfolio Construction and more details will be forthcoming. This will not be graded although completion will need to be documented.

There will be no difference in the CFA Charter granted upon passing Level III. 

What stays the same?

Common core provides the knowledge, skills and ability about investment management which transcend the three pathways workflows. It will cover:

• "Asset allocation." Capital market expectations, macro forecasting, handling constraints.
• "Portfolio construction." Equity, Fixed Income and Alternatives portfolio construction, Institutional versus private wealth portfolio construction, trading costs.
• "Performance measurement." Performance attribution, manager selection, Global Investment Performance Standards.
• "Derivatives & risk management." Options strategies, swaps/forwards/futures strategies, currency hedging strategies.
• "Ethics." Code of ethics, standards of professional conduct, Asset Manager Code.

What is included in the Private Wealth pathway content? 

Offers a global perspective on and universal principles for serving High Net Worth clients (worth US$5M+). It is structured as an arc from a young adult being onboarded and generating wealth to a private wealth manager to wealth transfer from the client. It builds on former versions of the CFA Program extending beyond simple investment management and financial planning to cover brand new areas such as family management, philanthropy and serving star athletes.
It is broken down into seven chapters:

1. “The Private Wealth management industry”. Various types of business models in the WM industry, different fee and compensation structures, quarterbacking the constellation of advisors to the wealthy and regulation/compliance considerations for wealth managers.
2. “Working with the wealthy”. Family and human dynamics and the social and psychological influences of wealth i.e. who you are dealing with across the tiers, complex family structures and family governance, necessary skills to find, serve and educate the wealthy, unique characteristics of ultra-high net-worths, approaches to develop a framework for family decision-making.
3. “Wealth planning”. Formulating goals-based financial plans, methods to manage financial exposures through life and protect assets, evaluation of how taxes influence plans for individuals, and formulating liquidity strategies.
4. “Investment planning”. Recommending portfolio allocations and investments for a private client, tax efficiency and tax management strategies to maximize post-tax return, approaches to retirement saving/planning and annuities and performance measurement and attribution to evaluate success through reporting.
5. “Preserving the wealth”. Types of risk to human capital and strategies to mitigate and manage those risks through products such as insurance, plans and strategies to mitigate inflation corrosion, and plans and strategies to mitigate exchange rate volatility risk.
6. “Advising the wealthy”. Citizenship, nationality, visas and legal residency approaches, maximizing net worth in complex family situations including double-taxation, maximizing human capital, financial capital and net worth for entrepreneurs, business owners, professionals, executives, and athletes, and managing concentrated asset positions in large privately-owned businesses.
7. “Transferring the wealth”. Use of gifts to transfer wealth during lifetime, use of bequests and inheritance to transfer wealth at death and wealth management approaches to charitable giving and philanthropy.

What is included in the Private Markets pathway content? 

Addresses private markets investing primarily from the perspective of the General Partner (GP). It builds on key valuation and other competencies in the CFA Program from all four asset class domains. It is peppered with engaging recent examples from the private markets and private credit boom such as Elon Musk’s acquisition of Twitter, Facebook’s acquisition of WhatsApp, Blackstone REIT, events at Silicon Valley Bank, Gabon’s debt-for-nature swap and several high profile LBOs such as Thyssen elevators in 2020.

It is broken down into seven chapters:

1. “Private investments and structures.” Features of private and public investments and markets, private investment methods and structures including equity debt real estate and infrastructure, types of and difference between performance metrics, comparison of risk and return profile to public markets as part of strategic asset allocation.
2. “GP and LP perspective and the investment process.” General Partners and Limited Partners roles, responsibilities and interactions in managing private investment funds and difference from public fund managers, alignment of interests between private investment firms and their investors including fee structures, calculation and interpretation of private market fund performance from an investor perspective including fees and carried interest, favorable characteristics of private investment targets and sources of value creation, due diligence and business planning in private investment process, alternative exit routes and impact on value.
3. “Private equity.” Private equity strategies over the company life cycle, characteristics of venture capital and growth equity investments, characteristics of buyout equity investments, valuation of private equity investment for venture capital, growth equity and buyout situations, risk and return among private equity investments and versus other investments as part of strategic asset allocation.
4. “Private debt.” Use of debt financing in private market strategies and across investment lifecycle, use of leveraged loans, high yield bonds and convertible bonds in private market strategies, use of mezzanine debt and uni-tranche debt in private market strategies, private debt profile and ratio analysis to value private debt investments, risk and return of private debt investments versus other private market investments as part of strategic asset allocation.
5. “Private special situations.” Addresses event-driven opportunities involving financial dislocation or distress, characteristics and risks of special situations, features of distressed debt, financing alternatives for issuers in financial distress and investment strategies in distressed situations and capital structure arbitrage and convertible arbitrage, features of complex investment situations involving financial dislocation or stress, due diligence and valuation processes used to evaluate special situations, risk and return among special situations as well as versus other private market investments as part of strategic asset allocation.
6. “Private real estate.” Private real estate investment features, economic value drivers of private real estate investments such as value-add and opportunistic and their role in the portfolio, due diligence and valuation processes for private real estate, distinctive investment characteristics of timberland and farmland, risk and return among private real estate investments as part of strategic asset allocation.
7. “Infrastructure.” Private infrastructure investment features, investment methods and investment vehicles and their uses, infrastructure investment process over the project life cycle and roles of debt and equity financing, due diligence and valuation processes for infrastructure investments, risk and return among infrastructure investments as part of strategic asset allocation.

What is included in the Portfolio Management pathway content? 

This contains the more advanced, public markets focused portfolio management content of the pre-existing CFA Program.
It is broken out into eight chapters:

1. “Index-based equity strategies” Overview of index-based equity investing strategies, comparison of market-cap-weighted vs. factor-based strategies, approaches to index return replication, and portfolio construction (full replication, stratified sampling, and optimization), tracking error and sources of return and risk in an index-based equity portfolio. 
2. “Active equity investing: strategies” Fundamental and quantitative approaches to active management aimed at outperforming a passive benchmark, rationale, and processes for bottom-up, top-down, factor-based, activist and arbitrage strategies, creation of fundamental and quantitative active investment strategies and equity investment style classifications.
3. “Active equity investing: portfolio construction” Construction of actively managed portfolios, influence of manager’s investment philosophy, Active Share vs. Active Risk approaches, risk measures, risk budgeting, and the effects of risk limits, AUMs, position size, liquidity, and portfolio turnover on portfolio construction, evaluation of portfolio structure efficiency relative to mandate, risks, costs, and effects on potential alpha of portfolio construction approach. 
4. “Liability driven and index based fixed income strategies” Dominance of Fixed Income securities and their role in investment portfolios, as well as selection, implementation, evaluation, and associated risk of strategies for managing liabilities under various interest rate scenarios to achieve a portfolio’s objectives, bond indexes and passive bond market exposure and criteria for benchmark selection and justification. 
5. “Fixed-income active management: yield curve strategies” Active fixed-income management to generate excess return, including effect of benchmark yield changes on portfolio returns, and portfolio positioning strategy based on forward rates or expected changes in interest rate volatility, using duration to evaluate a portfolio’s sensitivity, and yield curve strategies across currencies and their expected return and risk.
6. “Fixed-income active management: credit strategies” Considerations of spread-based fixed-income portfolios, including risk, comparison of spread measures, superiority of option-adjusted spread, bottom-up, top-down, credit-default-swap strategies and positioning strategies based on a specific credit spread view, assessing and managing tail and liquidity risk in credit portfolios, managing portfolios across international credit markets, using structured financial instruments as an alternative to corporate bonds and using analytical tools to manage fixed-income portfolios.
7. “Case study in portfolio management: institutional” Examination of issues involved in the development of a strategic asset allocation for long-horizon institutional investors through a case study based on a large university endowment undergoing an asset allocation review and portfolio execution, liquidity risk measurement and management, application of Code of Ethics and Standards of Professional Conduct, derivative use to meet exposure and liquidity needs, and ESG considerations.
8. “Trade strategy and execution” Trading and execution from a portfolio manager’s perspective across various markets, including equities, fixed income, derivatives, and foreign exchange, strategy selection and justification, execution benchmarks, cost measurement and evaluation, automation, including algorithmic trading and machine learning, as well as evaluation of firm’s trading processes and procedures from a regulatory perspective.