CFA® Program Level III

The CFA Level III exam is a computer-based test (CBT) administered by Prometric and offered twice a year, in February and August. Candidates must personally register and schedule their exam, as employers or training providers cannot do so on their behalf.

The exam lasts 4 hours and 24 minutes, divided into two equal sessions with an optional 30-minute break. It includes two types of questions: constructed response (‘essay’) questions and item sets. Essay questions may have multiple parts and require candidates to enter responses as free text, numerical entries or multiple-choice selections. Item sets follow a four-part format similar to those seen in Level II but demand a greater emphasis on application. The exam will feature either six item sets and five essay sets or five item sets and six essay sets.

Although Level III has fewer readings and learning modules than previous levels, its difficulty should not be underestimated, as application of knowledge is key. Candidates are not graded on grammar or writing style, but answers must be clear and well-structured to earn full credit.

Core

The content covers essential investment management knowledge, skills, and abilities applicable across all three CFA Level III pathways. The curriculum covers:

• Asset Allocation: Capital market expectations, macro forecasting, and handling constraints.
• Portfolio Construction: Equity, fixed income, and alternative portfolio construction, institutional vs. private wealth portfolio construction and trading costs.
• Performance Measurement: Performance attribution, manager selection and Global Investment Performance Standards (GIPS).
• Derivatives & Risk Management: Options strategies, swaps, forwards, futures strategies and currency hedging strategies.
• Ethics: Code of ethics, standards of professional conduct and the Asset Manager Code.

Private Wealth Pathway

This pathway focuses on serving High Net Worth (HNW) clients, offering a global perspective on wealth management, tax planning and family office structures. It covers the full wealth lifecycle, from accumulation to intergenerational transfer. The curriculum covers:

• The Private Wealth Management Industry: Overview of the wealth management landscape, key players (private banks, multi-family offices, independent advisors), regulatory considerations and the evolving role of technology.
• Working with the Wealthy: Understanding HNW client needs, behavioural biases, wealth psychology, client segmentation and the importance of trust.
• Wealth Planning: Structuring wealth for efficiency, estate planning, tax optimisation strategies, legal considerations, trusts and foundations, as well as cross-border wealth planning complexities.
• Investment Planning: Portfolio management for HNW clients, risk profiling, strategic and tactical asset allocation and diversification across traditional and alternative assets.
• Preserving the Wealth: Risk management techniques, asset protection strategies, insurance solutions, and the role of legal structures in safeguarding wealth.
• Advising the Wealthy: Best practices in client relationship management, ethical considerations, behavioural finance implications, effective communication strategies and integrating financial and non-financial goals.
• Transferring the Wealth: Intergenerational wealth transfer strategies, succession planning, governance structures for family wealth and philanthropic planning.

Private Markets Pathway

This pathway focuses on private markets investing, primarily from the perspective of the General Partner (GP). It builds on valuation and investment principles across asset classes and incorporates real-world examples from private equity, private debt and infrastructure. The curriculum covers:

• Private Investments and Structures: Overview of private market investments, fund structures, legal and regulatory considerations, liquidity constraints and fee structures in private market investing.
• GP and LP Perspective and the Investment Process: Roles and objectives of General Partners (GPs) and Limited Partners (LPs), fund-raising dynamics, due diligence, capital commitments, investment selection, value creation and exit strategies.
• Private Equity: Venture capital, growth equity, buyouts, valuation techniques, deal structuring, leverage considerations, and the role of operational improvements in generating returns.
• Private Debt: Direct lending, mezzanine financing, distressed debt, structured credit, risk-return characteristics, credit analysis and how private debt fits within an investment portfolio.
• Private Special Situations: Niche investment opportunities such as restructuring, turnarounds, distressed asset investing, event-driven strategies and the role of activist investors in private markets.
• Private Real Estate: Investing in real estate through private funds, REITs, direct ownership, and structured vehicles, with a focus on valuation, risk management, financing structures and market cycles.
• Infrastructure: Characteristics of infrastructure investments, funding models (public-private partnerships, private financing), risk factors (regulatory, operational, political) and cash flow considerations in sectors such as energy, transport and utilities.

Portfolio Management Pathway

This pathway covers advanced public markets portfolio management, focusing on investment strategies, institutional asset management and trade execution. The curriculum covers:

Index-Based Equity Strategies: Construction and management of index-based portfolios, passive investment vehicles (ETFs, index funds) and tracking error considerations.

Active Equity Investing: Strategies: Fundamental and quantitative strategies, factor investing, growth vs. value investing.

Active Equity Investing: Portfolio Construction: Optimisation techniques, risk budgeting, position sizing, diversification and trade-offs between risk and return in an actively managed equity portfolio.

Liability-Driven and Index-Based Fixed Income Strategies: Managing fixed-income portfolios relative to liabilities, duration matching, immunisation strategies, cash-flow matching and the role of index-based fixed-income investing.

Fixed-Income Active Management: Yield Curve Strategies: Strategies for positioning along the yield curve, duration management, yield curve steepening and flattening trades and relative value opportunities based on interest rate expectations.

Fixed-Income Active Management: Credit Strategies: Credit risk assessment, spread trading, high-yield vs. investment-grade bonds, and managing credit exposure in a fixed-income portfolio.

Case Study in Portfolio Management: Institutional: Real-world application of portfolio management concepts in institutional settings covering an endowment.

Trade Strategy and Execution: Market microstructure, trade execution strategies (VWAP, TWAP, algorithmic trading), transaction cost analysis, and managing market impact in institutional trade execution.

Having passed both previous levels, CFA Level III presents the final hurdle. Passing the CFA Level III exam will:

• Allow you to apply for your charter (assuming you have the necessary work experience).
• Enable you to join CFA Institute as a regular member.
• Highlight your continued commitment to high standards of ethics.
• Set up your prospects for a successful financial career.

In order to enrol for the CFA Level III exam you should:

• Have passed CFA Level II at least six months prior to your CFA Level III exam date.
• Have completed a suitable undergraduate degree or have the required work experience.
• Be in possession of a valid international passport.
• Sign Professional Conduct and Candidate Responsibility statements.