2019 changes | new readings | topic area weights adjustments | Levels I, II and III CFA® Program

CFA 2019 curriculum includes many new readings. Changes in topic area weights are completely unprecedented. CFA Institute has changed weight of many topic areas. This will require a radical change in your CFA exam preparation plan.

CFA 2019 changes | Level 1 Exam:

One new reading: (2019 Reading No. 43 “Fintech in Investment Management” by Barbara J. Mack and Robert Kissell, PhD) has been added.

One reading has been deleted from topic area FRA. (2018 Reading no. 22 Financial Reporting Mechanics).

Readings in topic area Portfolio Management have been re-arranged into two study sessions (previously – one), resulting in total number of study sessions being 19 – instead of 18.

Topic area weights have been substantially modified:

Topic Area: New weights, old weights

Ethics: 15%, 15%
Economics: 10%, 10%
Quantitative Methods: 10%,12%
Financial Reporting and Analysis:15%, 20%
Fixed Income:11%,10%
Equity Investments:11%,10%
Corporate Finance:10%, 7%
Portfolio Management, 6%, 7%
Alternative Investments: 6%, 4%
Derivatives: 6%, 5%

CFA 2019 Exam | Level II changes

CFA Institute has not made any major changes this year. Removal of case studies in Ethics topic is not a big issue. Similarly, new reading 8 in Quantitative techniques is simply old reading with additional section on Machine Learning. All of old questions for this reading are still relevant. We are excited about new readings numbers 6 and 17.

There are major changes in topic area weights. Looks like CFA Institute is no more offering heavy weights for Financial Statement Analysis and Equity Investments. This will require major change in exam preparation by candidates. You cannot avoid mastering all topic areas. Better, start early and practice more. This will give you better chances of passing the exam, even if pass rate drops. Remember, though format is still same as Level I CFA Program :multiple choice questions. However, format will be: item set questions.

CFA 2019 Level 2 | New Readings List
3 Application of the Code and Standards
6 Fintech in Investment Management
8 Multiple Regression and Machine Learning
17 Analysis of Financial Institutions
37 Credit Analysis Models (different author)

CFA 2019 Level 2 | Deleted Readings List
3 CFA Institute Research Objectivity Standards
4 The Glenarm Company
5 Preston Partners
6 Super Selection
10 Multiple Regression and Issues in Regression Analysis
38  Credit Analysis Models (different authors)

Introduction of new readings for candidates of CFA 2019 curriculum | Level II CFA Program

Reading No. 3 is collection of mini case studies including some of the old readings.

Reading No. 6 is completely new reading with seven sections. Topics covered include: Big Data, Artificial Intelligence, Machine Learning, Data Science, Text Analytics, Natural Language Processing, Robo-advisory services, Algorithmic trading and Distributed Ledger Technology.

Reading No. 8 is essentially the same reading as last year with a new section number 7 ‘Machine Learning’ added. This section is further divided into five sub sections.

Reading No. 17 starts with a discussion on why financial institutions are different than other businesses. Detailed financial statement analysis of Banks and Insurance businesses appears next.

Reading 37 combines many topics into one reading. Most of it is not new. Candidates will find section on credit spreads interesting.

CFA 2019 Syllabus: Level 3 Changes

2019 brings major changes to Equity Investment section of CFA Exam Level III. New readings are very enjoyable to read and not difficult at all. You will feel happy and learn lot more interesting concepts. We recommend not relying on study guide and reading the entire curriculum. You will be able to quickly review all material using our notes.

2019 New Readings:

Reading 5 | Overview of the Asset Management Industry and Portfolio Management
Reading 6  | Professionalism in Investment Management
Reading 26  | Introduction to Equity Portfolio Management
Reading 27  | Passive Equity Investing
Reading 28  | Active Equity Investing: Strategies
Reading 29  | Active Equity Investing: Portfolio Construction

2018 Readings – Deleted

Reading 20 Market Indexes and Benchmarks
Reading 25 Equity Portfolio Management
Reading 32 Monitoring and Rebalancing

Introduction of new readings for candidates of CFA 2019 curriculum | Level III CFA Program:

New Level III CFA Program exam reading number 5 is divided into three sections. There is a introduction of asset management industry at world level. You get to learn about : 1) Client segments 2) Products types 3) New trends (Robo-Advisors and Big Data). Candidates will find this very refreshing. Interesting information is presented in this section. There is a review of investment management process – same old matching of clients objectives and investment opportunities. A quick review of investment governance structure.

Level III CFA Program curriculum reading number 6 is a short reading without any technical information. Candidates are introduced to professions in general. Importance of professionalism in investment is discussed next.

CFA Level III exam reading number 26 introduces equity portfolio management. First there is discussion of why invest in equities? Second topic is universe of equity investments available and how to segment them. Third topic covers income and cost in equity portfolio. Fourth topic is interaction between investors and companies. Final subject is active vs. passive equity investment. Reading has more ‘article-like’ and there are no formula or technical stuff to remember. Candidates will be able to enjoy reading of material without worrying about retention issues.

Level III CFA Program syllabus 2019 reading number 27 covers five topics. There is discussion on selection of  passive benchmark. Next section considers merits and demerits of pooled investments vs. derivatives based approach vs. separately managed accounts. Candidates will learn about passive portfolio construction techniques. Controlling tracking error is discussed next. Final topic discussed is attribution analysis. This chapter is fairly lengthy and has many interesting sub-sections with couple of formulas. Candidates are not required to learn any calculation.

CFA Exam III reading number 28 mentions five topics. The chapter begins with a very hotly debated topic i.e. two different approaches to active management: A) fundamental and B) systematic. Next is an introduction of various strategies 1)bottom-up 2)top-down 3)factor-based 4)activist. Next is how to add value using fundamental strategies. Second last subject is quantitative strategies. Final discussion is about styles of fund mangers. A very long reading with lot of examples and graphs. Calculations are not involved.

2019 CFA Program Level III reading number 29  states “building blocks” of portfolio construction. Students will read about approaches to portfolio construction. Next subject is Risk budgeting. A very interesting problem scale. What is a well-constructed portfolio?  Equity strategies other than long-only. Candidates will spend a great deal of time on this reading in 2019.

How do Curriculum Changes affect your CFA Study Plan?

For the most part, your CFA study plan probably hasn’t changed over the last few years. The curriculum usually only changes by minor details from year-to-year and the format of the exams remains the same. This year brought the biggest curriculum changes I’ve ever seen as well as changes to topic weights.

Is it time to reassess our basic study strategies?

While these changes will certainly affect your study plans, especially if you are repeat tester, it is the change in topic weights that will drive the biggest transformation in your study.

In the Level 1 and Level 2 exams, almost all the changes made bring the topic weights closer together. The topics that have historically been core areas for focus had their weightings come down slightly while secondary topic areas rose in importance.

On the Level 1 CFA exam, Financial Reporting and Quantitative Methods (most heavily weighted topics in the past) dropped to lower weightage of the test while historically less influential topics on the exam like Derivatives and Alternative Investments both increased in importance.

On the Level 2 CFA exam, Financial Reporting and Equity Investments (the two most important topics in the past) both saw their potential weightings decrease.

Fixed Income and Derivatives both decreased in importance while Portfolio Management increased in weighting.

On the Level 3 CFA exam, Equity Investments and Fixed Income increased in importance while Derivatives and Portfolio Management decreased in weightage.

The format of the exams has not changed. The Level I CFA Program exam is still 240 multiple choice questions, each with three possible answers. The Level II CFA Program exam is still 20 vignettes of six multiple-choice questions each for a total of 120 questions. The Level III CFA Program exam is still an essay in the morning followed by 10 vignettes of six questions each in the afternoon.

The change to your study plan will come from the fact that you may no longer be able to focus on just a few topic areas. Portfolio Management, Alternative Investments, Derivatives and Corporate Finance are still secondary topic areas in the Level 1 exam but now there are seven topics that each account for a tenth or more of your total score.

Every topic in the Level 2 exam has the potential of being a tenth or more of your total score and you’re guaranteed to see at least 10% of the questions in four topics.

Ethics continues to be a very important topic area, especially since the readings really don’t change for each level so you can really get a head-start by focusing on it for the first exam.

While their importance may be lower in the first exam, Equity and Fixed-Income Investments continue to be relatively important to the final two exams.

The CFA exams saw some of their biggest curriculum weightage changes in years for 2019 and you should take it into account when planning your study schedule.

While many of the important focus topics are still relatively high-value, you might have to spend a little more time on other topics.


How does the CFA Exam Stay Current?

I get questions occasionally about the CFA exam and how the CFA Institute updates the exam to stay relevant in the industry.

The curriculum across the three exams does change regularly with the addition of new readings while others are dropped each year.

Ten topic areas remain but the emphasis and material within each may change.

The Institute uses a committee of practicing CFA charter holders and staff to design the curriculum with input from other charter holders through an annual survey.

The education advisory council (EAC) provides oversight and guidance to the process of development.

The EAC is comprised of five groups: the executive advisory board that oversees the council, a working body of volunteers to assist the board, working groups formed for specific tasks, and curriculum consultants that are contacted to actually develop new readings.

The EAC selects the body of knowledge sections to be reviewed each year and sets priorities for the topic areas.

It also makes recommendations for development of the process and balances the topic areas according to task force reports.

Curriculum consultants review the readings for relevancy, write practice problems and author curriculum material in their area of expertise.

A lot of the initial input into curriculum changes and development comes from the charter holders themselves with the Practice Analysis Survey, conducted each year.

The survey provides continuous feedback from industry practitioners to the Institute on curriculum relevance.

I took the survey last week, by email and lasting about 25 minutes. Questions did not get into a lot of detail but focused on the importance of higher-level topic areas to the skills needed by new charter holders in the industry.

The focus is on new charter holders and preparing them for a changing industry. (questions below may not be worded exactly as they appear in the survey).

Q1, What % of content should be devoted to each topic across all three exams

Q2, In which of the topics do you spend the majority of your time

Q3, Rate the degree to which each trend will impact the practice of investment professionals over the next five years

  • Development of new financial products
  • Importance of market liquidity
  • Improved measures of counter-party and settlement risk
  • Demise of Modern Portfolio Theory and efficient frontier portfolio optimization
  • Impact of asset price bubbles on market equilibrium
  • Impact of behavioral finance
  • Rise in pension funding shortfalls
  • Role of environment, social, and governance factors on investment decisions
  • Importance of understanding financial history

Q4-Q13, Rate each knowledge area related to each topic area planning by importance and to what extent must a new CFA charterholder have mastered the area?

(followed by a separate page for each topic area on which you are expected to rate the importance of topic area sections and what level of mastery must be achieved (none, recall, application, synthesis).

Q14, Additional comments

From what I have seen, the curriculum does a good job of staying relevant to actual practice in the industry. Of course, there are details within each topic area that are not covered in the curriculum.

You wouldn’t expect to become a bond guru like Bill Gross just by passing the CFA exams. The body of knowledge gives you a general understanding across the topic areas from which you can use to guide decision making in your specific field.



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