Episode #06 Dr. Nelson Lacey, CFA – A Deeper Look Into the CAIA Designation

Dr. Nelson Lacey, CFA is a professor of finance at the Isenberg School of Management at the University of Massachusetts. He earned his PhD in finance from the Pennsylvania State University and he also holds the CFA charter. Professor Lacey has been at CAIA since its inception. He has been active in working on the program’s curriculum and examination and became a Director of Exams in 2004. Professor Lacey’s academic work has led to over 50 publications in finance and economics. He is also the co-author of the book Modern Corporate Finance: Theory and Practice.

The love for knowledge is really one of the main reasons why we started this project. We truly believe that education is not an end in itself, but a continuous journey. As Albert Einstein said, “Intellectual growth should commence at birth and cease only at death”.

With that in mind, if you look at the financial services world, there are really dozens of exams you can take in order to learn new things and improve your career prospects. Some of them are less well known, but I bet you will be familiar with a few of them, such as the CFA, the FRM and CAIA, to name a few.

For those of you who don’t know what CAIA is, it stands for Chartered Alternative Investments Analyst. And it is a financial designation that focuses specifically in Alternative Investments, such as structured products, commodities, real estate, private equity and hedge funds.

We had the pleasure of interviewing the Director of Exams at the CAIA Association, Dr. Nelson Lacey. What is interesting about this interview is that it does not only cover the CAIA designation on its own. There is an obvious curiosity, especially amongst undergraduate and graduates students in the field of finance and investing, about the benefit of an Alternative Investments designation. When people ask me about CAIA, I tend to naturally gravitate towards comparing it to the CFA designation. Of course, it makes sense, as everyone in our field knows what it is. And that is exactly what Dr. Lacey did during our interview.

If you are thinking about studying for the CAIA exams or are already a candidate, I really believe this conversation will help you. We cover topics such as the growth in the interest in alternative investments in emerging markets, especially in India and China, we discuss some misconceptions that people have about investing in alternatives, how the CAIA curriculum and exam questions are written, and much more.

And now, the show notes:

[03:00] How Dr. Lacey’s background and how he got involved with the CAIA Association

[10:00] Comparison between the CFA and CAIA designations

[11:00] The process of putting together exam questions

[12:10] How to study for CAIA

[13:15] How the CAIA Association comes up with a “passing grade” for each of their exams

[17:15] The difference in the pool of candidates for CAIA vs. CFA

[21:30] The growth in awareness of financial designations as a function of the development in domestic financial markets.

[24:00] What are the main reasons why candidates decide to study for the CAIA designation

[28:00] Dr. Lacey discusses the examination fees for the CAIA exams

[31:30] A discussion of the CAIA University partnership and scholarship programs.

[34:30] A discussion of the “Warren Buffett Bet”

[40:10] A discussion of a common misconceptions about what alternative investments are supposed to do for a portfolio.

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The next episode will come out on February 23rd, in which we interview Steven Gerbel, a Merger Arbitrage Hedge Fund Manager and founder and president of Chicago Capital Management, LP.