CFA Alternative Investment is covered in all three levels of the CFA exam, and the proportion increases from 4% in Level 1 to 5-15% in Level 3. What is the best strategy to prepare for this alternative investments section?
Similar to Derivatives, Alternate Investments have a very small representation on the CFA Level 1 exam. Most candidates find the readings a lot easier than Derivatives through, both in terms of volume and difficulty.
There is only one study session with one reading on the introduction of alternative investments, including real estate, private equity, and hedge funds.
AL’s representation in L2 remains relatively small at 10-15%, but there are more reading materials. Also, the topics are scattered: PE/VC, commodities, hedge funds, and real estate are all considered alternative assets, but they’re so inherently different from one another. Hedge funds and commodities are relatively easy, but some PE/VC & real estate calculations could get tough.
Given that AL is only 4% of the L1 exam, many candidates skip this section to save time for heavyweights such as FRA.
Don’t do that because AL has a big bang for the buck.
AL’s reading is very short – 100 pages in CFAI text, or 25-30 pages if you use third-party materials. At the same time, both the reading and questions are easy to read, focusing mostly on definitions. These are easy points to score.
If you run out of time, you can rely on the Kaplan Schweser notes. You’ll only need to spend a couple of hours reviewing the material.
Here are more tips on these topic areas: