Wednesday 8/19 Memo

Each morning, I write a 420-word memo because writing is one of the best way to focus your thinking & effect some change you desire. It is a physicalized version of what is going on inside your mental environment.

Today’s memo is a full outline of the CAIA certification, my study plan & progress, and a focused topic list (basically, a post for me).

First, what is the CAIA?

A two-level certification program which covers the categorization & analysis of alternative asset classes, the tools & techniques used to evaluate the risk-return attributes of each asset class (Level I), and the skills & knowledge that a portfolio manager or an asset allocator must possess to manage an institutional-quality portfolio with both traditional & alternative assets (Level II).

I plan to take the Level One exam on September 30th (will reschedule on August 24).

I have organized the curriculum based on… 1) my interests, 2) the exam weight of each category—as in, the # of questions per topic, and 3) my dual strategy, which is to learn & retain the information for my own investment operations at the same time I develop a method for passing the exam.

The following is my prioritized, focused topic list w/ chapters in the order I plan to read them:

1. Hedge Funds: Part 1 Chs 14, 15 & 18

2. Private Equity Chs 20, 21 & 22

3. Structuring, Equity-Linked Products Chs 26 & 23

4. Credit Risk & Derivatives Chs 24 & 25

5. Math Part 1: Quant & Stats Chs 6, 7 & 8

6. Math Part 2: Measures & Valuation Chs 4, 5 & 3

7. Real Estate, Natural Resources & Land Chs 12, 13 & 9

8. Commodities & Other Real Assets Chs 10 & 11

9. Alt Investments Intro & Environment Chs 1 & 2

10. Hedge Funds: Part 2 Chs 16, 17 & 19

I took a practice exam yesterday and scored a 58%. My goal was 65-72%. Upon brief review, I have decided to focus first on the formulas, calculations & applications. Next, I will focus on the smallest areas of the test—real assets, private equity & structured products make up 32-48% of the exam & may account for 70 out of the 200 questions. Again, this is a targeted strategy for my own purposes & I don’t recommend others to take the same approach. I am just interested in hedge funds & know that I will score well in that category, which is 12-20% on it’s own (third largest area behind Alternative Investments and Standards & Ethics). I am only dedicating minimal time toward the end of my study plan for Standards & Ethics.