CFA Level 3 Specialized Pathways

CFA Institute has introduced new specialized pathways for the Level 3 exam. The new curriculum was put into effect from 2025 onwards. Read the article below to get a detailed account of the new changes in the Level 3 CFA exam. 

CFA Level 3 specialized pathways

CFA specialized pathways: The CFA Institute has introduced major changes to the Level 3 CFA curriculum. The institute has introduced Specialized Pathways for CFA Level 3 candidates 2025 onwards. The institute has introduced two new versions of Level 3 in Private Wealth and Private Markets, while also keeping the traditional pathway, Portfolio Management. Candidates can choose the path which best aligns with their interests and aspirations. The three pathways of the Level 3 CFA exam will include a common core of the curriculum and additional specialised content for each pathway.

Candidates can choose one of the three pathway options during the CFA registration. Candidates must carefully choose the pathway as they cannot be changed after registration. The weightage of the curriculum will be divided as follows:

Along with the introduction of the pathways, the institute has also introduced a new Practical Skills Module (PSM) known as the ‘Portfolio Development and Construction’. This practice module can only be accessed by the Level 3 students. In this article, you will read a detailed account of the new specialised pathway designed for Level 3 candidates.  

Also Read: CFA exam pattern 2025

Common Core Curriculum

Regardless of their choice, candidates have to share a common curriculum which will have the maximum weightage. The common pathway will include the following:

• Asset Allocation- Capital market expectations, macro forecasting, handling constraints
• Portfolio Construction- Equity, Fixed Income and Alternatives Portfolio Construction, Institutional versus Private Wealth Portfolio Construction, Trading Costs
• Performance Measurement- Performance Attribution, Manager Selection, Global Investment Performance Standards
• Derivatives and Risk Management- Options strategies, swaps/ forwards/ futures strategies, Currency Hedging Strategies
• Ethics- Code of Ethics, Standards of Professional Conduct, Asset Manager Code

Specialised Pathways- Electives

The weightage of the specialized pathways is 25% to 35%. Candidates can choose among the following three specialized pathways for the Level 3 CFA 2025 exam:

• Portfolio Management
• Private Wealth
• Private Markets

Also Read: CFA syllabus

CFA Specialised Pathways- In Detail

Private Wealth Pathway

The private wealth pathway offers a global perspective and universal guidelines for working with High Net Worth clients who have a net worth of 5 million dollars or more. It follows a journey from a young adult starting to build wealth with the help of a private wealth manager, to eventually transferring wealth to the next generation. This pathway expands on previous CFA Program content, going beyond just investment management and financial planning. It now includes new topics such as family management, philanthropy, and serving star athletes. This specialised pathway is further divided into seven chapters:

• Private Wealth Management Industry: Different kinds of business models in the wealth management industry which have different fee and compensation structures, coordinating with various advisors and understanding regulatory and compliance issues for wealth managers
• Working With Wealthy: Includes family dynamics and human psychology. Understanding social and psychological aspects of wealth whilst dealing with complex family structures and developing the skills to serve and educate high net-worth clients.
• Wealth Planning: Creating goal-based financial plans, managing financial risks, protecting assets, understanding tax impacts and developing liquidity strategies.
• Investment Planning: Recommending investment portfolios to private clients, maximizing tax efficiency, helping clients plan retirement through retirement and saving plans, evaluating investment performance through reporting, etc.
• Preserving Wealth: Identifying the various types of risks to human capital using insurance and other products, and strategies to protect against inflation and currency volatility.
• Advising the Wealthy: Navigating citizenship, nationality and residency issues whilst handling complex family financial situations. Maximizing the net worth of wealthy professionals along with managing their business assets.
• Transferring Wealth: Using gifts and bequests to transfer wealth and strategies for charitable giving and philanthropy.

Also Read: When is the CFA exam?

Private Markets Pathway

This pathway addresses the investments made by the private markets from the perspective of the General Partner (GP). It expands on important valuation skills and other key concepts from all four asset classes of the CFA program. The curriculum includes recent engaging examples from the private markets such as Elon Musk’s acquisition of Twitter, Facebook’s acquisition of WhatsApp, Blackstone REIT, events at Silicon Valley Bank, Gabon’s debt-for-nature swap and several high-profile LBOs such as Thyssen elevators in 2020. It is further divided into seven chapters:

• Private Investments and Structures: As the name suggests, it focuses on understanding private investments and structures. It includes the methods and structures of debt, equity, infrastructure, etc. It also explores the difference between the various types of performance metrics and compares the risk and return profiles of private versus public markets within strategic asset allocation.
• GP and LP Perspectives: This explores the roles and responsibilities of GPs or General Partners and Limited Partners (LPs) in managing the private investment fund. Learning about fee structures, fund performance and alignment of interests between investors and investment firms. One will also get to explore favourable characteristics of investment targets, due diligence, business planning, and alternative exit routes and their impact on value.
• Private Equity: Delves into the private equity strategies which include venture capital, growth equity, and buyout investments. It also includes private equity investments and the risk and return as compared to other investments.
• Private Debt: Examines the use of debt financing in private market strategies including leveraged loans, high yield bonds, mezzanine debt and uni-tranche debt. Candidates can learn about the private debt profile and ratio analysis while comparing the risk and return on other debt investments.
• Private Social Situations: Explores event-driven opportunities which involves financial dislocation or distress, financing alternatives for issuers in distress and investment strategies such as capital structure arbitrage. 
• Private Real Estate: Focuses on the features and economic drivers of private real estate investments including farmland and timberland. Understanding the due diligence and valuation process for real estate and comparing their risk and return profiles within strategic asset allocation. 
• Infrastructure: Talks about private infrastructure investment features, vehicles and methods. It studies the overall investment process including the roles of equity financing and debt and compares their risk and return profiles within strategic asset allocation. 

Also Read: How Hard Are the CFA Exams

Portfolio Management

This is the traditional pathway of the CFA Level 3 curriculum. The pathway focuses on public markets-focused portfolio management. It is further divided into eight chapters:

• Index-Based Equity Strategies: It gives an overview of the following:
  • Index-based equity strategies
  • Comparison of market-cap-weighted and factor-based strategies
  • Approaches to index-based return replication
  • Portfolio construction (full replication, optimization and stratified sampling)
  • Tracking error and sources of return and risk
• Active Equity Investing: It focuses on the following
  • Fundamental and quantitative approaches to active investing
  • Rationale
  • Processes for various active strategies including bottom-up, top-down, factor-based, activist and arbitrage strategies
  • Creation of active investment strategies
  • Equity investment style classifications
• Active Equity Investing-Portfolio Construction: It explores:
  • Construction of actively managed portfolios
  • Influence of manager’s investment philosophy
  • Active Shares vs Active Risks
  • Risk Measures
  • Risk Budgeting
  • Effects of Risk Limits
  • AUMs
  • Position Size
  • Liquidity
  • Portfolio Turnover
  • Evaluation of Portfolio Structure
• Liability Driven and Index Based Fixed Income Strategies: It focuses on:
  • Dominance, Selection, Evaluation and Implementation of Fixed Income Securities and their role in Investment Portfolio
  • Associated Risk of Strategies for Managing Liabilities
  • Bond Indexes
  • Passive Bond Market Exposure
• Fixed Income Active Management- Yield Curve Strategies: It delves into:
  • Active fixed-income management to generate excess return
  • Effect of benchmark yield changes on portfolio returns
  • Portfolio positioning strategy based on forward rates
  • Interest rate volatility
  • Evaluation of Portfolio sensitivity
  • Yield curve strategies across currencies and their expected return and risk
• Fixed Income Active Management- Credit Strategies: It focuses on:

• • Considerations of spread-based fixed-income portfolios
  • Comparison of spread measures
  • Superiority of option-adjusted spread
  • Credit-default-swap strategies and positioning strategies based on a specific credit spread view
  • Assessing and managing tail and liquidity risk in credit portfolios
  • Managing portfolios across international credit markets
  • Using structured financial instruments as an alternative to corporate bonds
  • Using analytical tools to manage fixed-income portfolios

• Case Study in Portfolio Management- Institutional: It includes:
  • Examination of issues involved in the development of strategic asset allocation for long-horizon institutional investors through a case study
  • Liquidity risk management and measurement
  • Application of Code of Ethics and Standards of Professional Conduct
  • ESG considerations
  • Derivative use to meet exposure and liquidity needs
• Trade Strategy and Execution: It focuses on:
  • Trading and execution across various markets
  • Fixed income
  • Derivatives
  • Foreign Exchange
  • Strategy selection and justification
  • Execution Benchmarks
  • Cost Measurement, Evaluation and Automation
  • Machine Learning and Algorithmic Trading
  • Evaluation of firm’s trading process and procedures

Why Has the CFA Institute Introduced Specialised Pathways?

CFA institute has introduced the specialised pathways for Level 3 exams from 2025 onwards for the following reasons:

• The CFA has been traditionally populated primarily by the buy-side and sell-side equity. But now, the buy-side is evolving and hence many graduates are aspiring to expand range of roles on the buy-side as their “job after the job”. With the rise of the 'golden age' where alternative market forecasts have shown a boom and the private wealth industry has also grown in prominence and stature, the focus has shifted beyond simple buy-outs. 
• At present, approximately half of the discretionary Portfolio Managers are CFA charterholders. Although the Portfolio Managers share some similarities with the Private Wealth Market managers, the institute realised there is a need to better prepare the candidates for advancement or transition into new roles. 
• By keeping one common core pathway, the institute introduced a specialised pathway which aligns with the student's interests and aspirations. The specialised pathway was introduced to sharpen the students' competitive edge. Students can choose which career path on the buy-side is best for them after passing the Level 2 CFA exam. If a student is a budding security analyst and wants to be promoted to PM or move to the buy-side, he/she may choose Portfolio Management. On the other hand, Analysts and Associates who want to take up a role as an Investment Associate at a General Partner firm may choose the Private Markets pathway. Similarly, Junior Wealth Managers or Relationship Managers or Investment Advisers who wish to serve high net-worth clients may choose the Private Wealth pathway.

Read More:

• When is the CFA exam?
• CFA pass rate
• CFA exam preparation