CONTENTS MODULE 1: OVERVIEW 4 MODULE 2: ETHICS AND REGULATION 6 MODULE 3: TOOLS AND INPUTS 8 MODULE 4: INVESTMENT INSTRUMENTS 12

Size: px

Start display at page:

Download "CONTENTS MODULE 1: OVERVIEW 4 MODULE 2: ETHICS AND REGULATION 6 MODULE 3: TOOLS AND INPUTS 8 MODULE 4: INVESTMENT INSTRUMENTS 12"

Rudolph Harper
6 years ago
Views:

1 SYLLABUS OVERVIEW 1

2 CONTENTS MODULE 1: OVERVIEW 4 CHAPTER 1 The Investment Industry: A Top-Down View MODULE 2: ETHICS AND REGULATION 6 CHAPTER 2 CHAPTER 3 Ethics and Investment Professionalism Regulation and Supervision MODULE 3: TOOLS AND INPUTS 8 CHAPTER 4 CHAPTER 5 CHAPTER 6 CHAPTER 7 CHAPTER 8 Financial Statements Quantitative Concepts Microeconomics Macroeconomics International Trade and Foreign Exchange MODULE 4: INVESTMENT INSTRUMENTS 12 CHAPTER 9 CHAPTER 10 CHAPTER 11 CHAPTER 12 Equity Securities Debt Securities Derivatives Alternative Investments 2

3 MODULE 5: INDUSTRY STRUCTURE 15 CHAPTER 13 CHAPTER 14 CHAPTER 15 Structure of the Investment Industry Investment Vehicles and Structures Investment Market Characteristics MODULE 6: INDUSTRY CONTROLS 18 CHAPTER 16 CHAPTER 17 CHAPTER 18 Investment Industry Documentation Risk Management Performance Evaluation MODULE 7: SERVING CLIENT NEEDS 20 CHAPTER 19 Investor Needs and Investment Policy CHAPTER 20 Asset Allocation CHAPTER 21 Active and Passive Investment Management EXAM WEIGHTING 22 3

4 MODULE 1 OVERVIEW It is about getting to the heart and the core purpose of the investment industry its vital role in the world: from helping people save for the future to funding schools, hospitals, roads and other essentials. The benefits this brings when done well (ethically and all parts working together) help serve society. 4

5 CHAPTER 1 THE INVESTMENT INDUSTRY: A TOP-DOWN VIEW Explain how an economy benefits from the existence of the investment industry; Explain how an individual benefits from the existence of the investment industry; Describe types and functions of participants that collectively comprise the structure of the investment industry; Describe forces that affect the evolution of the investment industry. 5

6 MODULE 2 ETHICS AND REGULATION This module focuses on the essential foundations for the investment world ethics and regulation. The firm ground on which we build for our clients: trust, reputation, confidence and value the essentials of a strong and healthy client-focused industry. 6

7 CHAPTER 2 ETHICS AND INVESTMENT PROFESSIONALISM Describe the need for ethics in the investment industry; Identify obligations that individuals in the investment industry have to clients, prospective clients, employers, and co-workers; Describe the relevance of ethics to individuals that work in the investment industry; Identify the elements of the CFA Institute Code of Ethics; Explain the standards of practice (professional principles) that are based on the CFA Institute Code of Ethics; Describe consequences of conduct that is unethical or unprofessional; Describe a framework for making ethical decisions. CHAPTER 3 REGULATION AND SUPERVISION Describe objectives of regulation; Describe a regulatory process and the importance of each step in the process; Identify specific types of regulation and describe the reasons for each; Describe a firm s obligations to consumers and related elements of corporate policies and procedures; Describe potential consequences of inadequate regulation and of failure to comply with regulations and corporate policies and procedures. 7

8 MODULE 3 TOOLS AND INPUTS This is about understanding how the (economic) world works - the big picture and the fine detail. How the actions of individuals, corporations and governments play out at micro, macro and international levels, how this translates to a company s finances, and how to get a clearer understanding of what this all means. 8

9 CHAPTER 4 FINANCIAL STATEMENTS Compare information provided by the income statement, balance sheet, and cash flow statement; Compare types of assets, liabilities, and equity; Explain links between the income statement, balance sheet, and cash flow statement; Distinguish between profit and net cash flow; Identify and compare cash flow classifications of operating, investing, and financing activities; Explain the usefulness of ratio analysis for financial statements; Identify and interpret ratios used to analyze a company s liquidity, profitability, financing, shareholder return, and shareholder value. CHAPTER 5 QUANTITATIVE CONCEPTS Define the concept of interest; Compare simple and compound interest; Describe effects of time and discount rate on value; Explain the relevance of the net present value in valuing financial investments; Explain uses of mean, median, mode, range, percentile, and standard deviation; Describe and interpret the characteristics of a normal distribution; Describe and interpret correlation. 9

10 CHAPTER 6 MICROECONOMICS Define economics and the concept of scarcity; Differentiate between macroeconomics and microeconomics; Explain factors that affect quantity demanded and quantity supplied; Describe market equilibrium; Describe and interpret price and income elasticities of demand and their effects on quantity and revenue; Describe how demand for a good is affected by substitute and complementary goods and by market supply; Distinguish between economic profit and accounting profit; Explain production levels and costs, contrast fixed and variable costs, and explain the law of diminishing returns; Identify factors that affect pricing; Compare types of industry structure: perfect competition, pure monopoly, monopolistic competition, and oligopoly. CHAPTER 7 MACROECONOMICS the following: Describe why macroeconomic considerations are important to an investment firm and how macroeconomic information may be used; Define gross domestic product (GDP) and GDP per capita; Identify basic components of GDP; Describe economic growth and factors that affect it; Describe phases of a business cycle and their characteristics; Explain the global nature of business cycles; Describe economic indicators and their uses and limitations; Define inflation, deflation, stagflation, and hyperinflation and describe their effects on consumers, businesses, and investments; Describe and compare monetary and fiscal policy; Explain limitations of monetary policy and fiscal policy. 10

11 CHAPTER 8 INTERNATIONAL TRADE AND FOREIGN EXCHANGE Define imports and exports; Explain the need for and benefit of international trade; Describe comparative advantages among countries; Describe the flows of goods, services, and capital in international trade; Define the balance of payments and explain the relationship between the current account and the capital account; Compare fixed versus floating exchange rate systems; Describe basic functions of the foreign exchange market; Compare spot and forward transactions; Describe factors that cause appreciation and depreciation of currencies. 11

12 MODULE 4 INVESTMENT INSTRUMENTS This module covers the basic investment options, what they are and their purpose - from conventional equities and bonds to more specialized investments such as real estate and derivatives. 12

13 CHAPTER 9 EQUITY SECURITIES Describe characteristics of equity securities; Compare the risk and return characteristics of types of equity securities; Distinguish between preferred stock and common stock; Compare the risk and return differences between investing in a preferred stock and in a common stock; Describe global depository receipts; Describe the characteristics of a convertible bond; Describe differences in voting rights and other ownership characteristics among different equity classes; Describe approaches to valuing common stock; Describe corporate actions that affect a company s shares outstanding; Distinguish between an initial public offering (IPO) and a seasoned or secondary equity offering. CHAPTER 10 DEBT SECURITIES Describe the basic types and characteristics of debt securities; Identify issuers of debt securities; Explain default risk and describe the seniority ranking of debt securities; Describe characteristics of fixed-rate bonds, floatingrate bonds, and zero-coupon bonds; Describe characteristics of bonds with embedded provisions, such as callable bonds, putable bonds, convertible bonds, inflation-linked bonds, and structured debt securities; Explain risks of investing in debt securities; Describe the discounted cash flow approach to valuing debt securities; Explain the relationship between a bond s price and its yield to maturity; Describe credit spreads. 13

14 CHAPTER 11 DERIVATIVES Define a derivative contract and describe the uses of derivatives contracts; Distinguish between forwards, futures, options, and swaps; Describe the relation between a derivative instrument and its underlying; Distinguish between long and short positions in derivative contracts; Describe characteristics of derivative contracts; Compare forward and futures contracts; Describe option contracts and factors that affect option values; Describe swap contracts. CHAPTER 12 ALTERNATIVE INVESTMENTS Describe advantages and limitations of alternative investments; Describe private equity investments; Describe real estate investments; Describe commodity investments. 14

15 MODULE 5 INDUSTRY STRUCTURE The industry is complex and highly interdependent. This module looks at how the industry helps us invest, who the participants are and what they do, the different markets where investments take place, and the investment products themselves. 15

16 CHAPTER 13 STRUCTURE OF THE INVESTMENT INDUSTRY Identify and describe types of individual and institutional investors; Describe needs served by the investment industry; Describe services provided by the investment industry, including financial planning, investment advisory, investment information, trading, and custodial and depository services; Compare passive and active management, and describe approaches used by active investment managers to design their investment strategies; Identify types of financial intermediaries, including deposit-taking institutions, finance corporations, securitizers, and insurance companies, and explain their role in the investment industry; Distinguish between buy- and sell-side firms in the investment industry; Distinguish between front-, middle-, and back-office functions in the investment industry; Identify positions and responsibilities for firms in the investment industry; Describe aspects of institutional investors investment processes. CHAPTER 14 INVESTMENT VEHICLES AND STRUCTURES Explain the purpose of security market indices, identify their types, and describe uses of security market indices in the investment industry; Compare investing through direct investments in securities and assets with investing through indirect investments; Describe structured investment products, including linked notes, equity-linked annuities, and exchange traded notes; Distinguish among closed-end funds, openend mutual funds, exchange traded funds, and unit investment trusts and identify their relative advantages and limitations; Describe the characteristics of hedge funds; Describe the characteristics of funds of funds; Explain the differences between separate accounts and commingled accounts; Compare investment in taxable and tax-advantaged accounts; Compare defined contribution and defined benefit pension schemes. 16

17 CHAPTER 15 INVESTMENT MARKET CHARACTERISTICS Distinguish between primary and secondary markets; Identify characteristics of quote-driven, order-driven, and brokered markets; Compare the roles of brokers and dealers; Explain the roles of exchanges and alternative trading systems; Compare long, short, and levered positions in terms of risk and potential return; Compare different orders and order instructions; Describe steps for clearing and settlement of trades; Identify types of transaction costs; Describe market efficiency in terms of operations, information, and allocation. 17

18 MODULE 6 INDUSTRY CONTROLS Controls are critical in helping ensure everything runs smoothly. In the fast moving world of investments and risk it is essential to understand how systems and controls are used in the industry to ensure the client is properly served. 18

19 CHAPTER 16 INVESTMENT INDUSTRY DOCUMENTATION Define a document; Describe objectives of documentation; Describe document classification systems; Describe types of internal documentation; Compare internal and external documentation; Describe types of external documentation; Describe document management. CHAPTER 17 RISK MANAGEMENT Define risk and identify types of risk; State the importance of risk management; Describe a risk management process; Describe benefits and costs of risk management; Describe limitations of using models and historical information to measure risk; Define operational, compliance, and investment risks and their management. CHAPTER 18 PERFORMANCE EVALUATION Describe a process of performance evaluation; Compare measures of return, including arithmetic mean, geometric mean, and time-weighted rates of return; Compare measures of risk, including standard deviation, downside deviation, and reward-to-risk ratios; Describe uses of benchmarks; Explain the selection of a benchmark; Explain measures of relative performance, including tracking error and the information ratio; Explain the concept of alpha; Explain uses and processes of performance attribution. 19

20 MODULE 7 SERVING CLIENT NEEDS This is about focusing on clients gaining a clear understanding of their needs, circumstances, motivations and ambitions so investments can be allocated and managed in the right way for them. 20

21 CHAPTER 19 INVESTOR NEEDS AND INVESTMENT POLICY Describe the importance of identifying investor needs to the investment process; Describe and contrast types of investors; Explain how needs differ among investors; Describe the rationale for and structure of investment policy statements in serving client needs. CHAPTER 21 ACTIVE AND PASSIVE INVESTMENT MANAGEMENT Compare active and passive investment management; Explain factors necessary for profitable active management; Describe how active managers attempt to identify and capture market inefficiencies. CHAPTER 20 ASSET ALLOCATION Describe how portfolios are constructed to address client investment objectives and constraints; Compare strategic and tactical asset allocation. 21

22 EXAM WEIGHTING Questions in the examination will be allocated approximately as follows: Module 1 5% Module 2 10% Module 3 20% Module 4 20% Module 5 20% Module 6 20% Module 7 5% Note: These weightings may be subject to slight variation to allow for effective question trialing and to achieve an equal balance of difficulty for all candidates. 22

23 NOTES 23

24 version The Claritas mark is registered in several countries around the world.

International Certificate in Wealth and Investment Management

International Certificate in Wealth and Investment Management Effective from 21 May 2017 Chartered Institute for Securities & Investment Objective of the examination The objective of the examination is