The changes to the 2014 Level 3 curriculum from last year’s edition are the most extensive I have ever seen. Eight readings have been dropped, two readings have been replaced and one reading has been added. In all, the number of readings has dropped from 43 to 35 in the 2014 curriculum.
The de-emphasis on emerging markets and international assets is clear with most of the material dropped or fit into other readings with a generalized spin. This follows the general theme in the markets as international and emerging markets have fallen out of favor against a more generalized approach.
Most of the LOS changes are the more minor wording-type changes that really do not change what you need to study or understand. I have tried to catch the more important LOS changes below but most of the changes will come from the new or replaced readings.
As we’ve talked about in other posts, it’s up for debate whether new material is tested more heavily or not on the exam. I doubt that the Institute would try to trip up repeat testers that haven’t focused on new material but it’s intuitive that they would want to test the new material to see how candidates adopt it. Regardless, it’s important to understand the new directions the Institute is taking and to plan your studying accordingly.
Changes 2013 – 2014
Reading 13, “Low-Basis Stock” is replaced by “Concentrated Single Asset Positions.” While the two topics will have some similarities, i.e. low-basis stock is often a concentrated position for management, the LOS have changed and repeat candidates may want to spend some extra time here.
Study Session 5, Reading 17 – “Allocating Shareholder Capital to Pension Plans” has been dropped
LOS 18-b has been greatly simplified from a specific mandate to a more simplified, “discuss challenges in developing capital market forecasts.”
Last year’s Reading 20 in SS7, “Dreaming with the BRICs” has been dropped from the curriculum.
SS8, Reading 19 Asset Allocation has four new LOS (k through n). Three of these address portfolio effects from nondomestic assets, replacing a little of the lost emphasis from the dropped readings.
Last year’s Reading 22 in SS8, “The Case for International Diversification” has also been dropped.
Last year’s Reading 26 in SS10, “Hedging Mortgage Securities to Capture Relative Value” has been dropped
Last year’s Reading 30 in SS12, “Emerging Markets Finance” has been dropped
Readings 32 and 33 from SS13, “Swaps” and “Commodity Forwards and Futures” have been dropped to the massive cheers of candidates everywhere. Good material but extremely tough and why was there so much detail on derivatives anyway?
Reading 35 in SS14, “Currency Risk Management” has been replaced with Reading 28, “Currency Management: An Introduction.” It looks like the material is a little more basic though many of the LOS look the same. You’ll probably recognize most of the material if you took last year’s exam but don’t neglect the reading because there is quite a bit of new stuff here.
Study Session 16 is now called, “Trading, Monitoring, and Rebalancing” from last year’s, “Execution of Portfolio Decisions; Monitoring and Rebalancing” though the readings have remained the same and the LOS changes are relatively minor wording-changes.
Reading 42 from SS17, “Global Performance Evaluation” has been dropped
We’ll cover the changes to the level 2 exam in two weeks. Let me know if you have any questions or need something covered.
‘til next time, enjoy your break!
Joseph Hogue, CFA