just finished reading all 6 curriculum books, everything seems common sense, although i learned a lot.
If I recall correctly, it’s about slightly more than learning the lingo.
I’m not sure why I think that, however.
IDK if it’s really “lingo”. But there definitely is a certain way the institute wants you to start thinking about combining asset classes in an optimal way based on a clients risk tolerances.
Things like, you should never give a qualified client exposure to things like muni bonds - there’s no reason for them to give up the yield on things like their fixed income investments that is. You should never go active management in the large-cap space, but that it’s okay for international & emerging markets, but for your small cap growth stocks, it is ok and justifiable to a client to pay higher fees for active management.
I mean - that’s the whole thesis of activepassive. That, there are certain asset classes where manager failure rates are way too high to justify taking the chance on them consistently outperforming the benchmark, so use passive management for those asset classes, but deploy your clients dollars using active strategies where research shows that style can consistently outperform the benchmark.
I think that’s really the inner teachings of level 3, yea you have to know certain words and their meaning, but the “words” are just the trees. Passing that exam requires you see the FOREST through all of them.
Actually find it pretty tricky to study this stuff given I currently work for a large-mid cap active equity manager haha. That said, for the exam it is absolutely vital that we know how to answer questions the way that the CFAI wants us to, however in practice there are clearly areas that the curriculum’s ‘black and white’ approach may not be truly applicable. For example we are taught at LII that a pro-rata order size approach to allocation for incomplete orders is appropriate, however in practice I have seen first-hand how this can easily be gamed by competing portfolio managers when bidding into an oversubscribed deal; there are definitely more ‘fair’ approaches that can be followed in this regard.
Grain of salt I suppose.
Passing Level III is much deeper than learning the lingo. You can liken Level I to being in medical school - and Level II- to doing your residency, and Level III to actually going through all three years of your residency (after passing med school) and then finally becoming an MD.
Level I - is like a wide river - shallow but wide - you are memorizing formulas and terms.
Level II is a deepening of that river - deepening of the concept learning.
Level III represents a blending together of your learnings from levels I & II - but now, analyzing the data, and applying theory and practice.
The skills of rote learning and memory that work for Levels I and II - simply do not work for Level III. That’s why you may see people taking the Level III test multiple times. Hope this helps.
My two cents:
Regardless of the levels , you need to know the material without which you will fail…multiple times.
The only other difference Level III offers is the way the institute expects you to answer. You may be superb in your concepts …but if you do not know how to write the AM paper, chances are you will fail. Of course this is my own realisation. I did not pass Level III in my first attempt. And that is all there is to it.
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