The CFA Level 3 exam focuses on applying investment concepts to real-world scenarios. It has 22 Learning Modules across 5 core topics that emphasize constructing, managing, and evaluating portfolios for individual and institutional clients.
You will also select 1 of 3 specialized pathway topics: Private Wealth, which covers wealth planning and taxation; Institutional, focusing on managing assets for large entities like pension funds; or Behavioral Finance, exploring psychological biases in investment decisions. This tailored approach ensures a comprehensive grasp of advanced investment strategies and portfolio management principles.
CFA Level 3 Topic Structure
On the CFA Level 3 exam, you are assessed across five core topics, along with a pathway. The table below provides detailed insights into the topic weights and associated Learning Modules:
| CFA Level 3 Topics Overview | ||
|---|---|---|
| Topics | Weight | No. of Learning Modules |
| Asset Allocation | 15-20% | 5 |
| Portfolio Construction | 15-20% | 7 |
| Performance Measurement | 5-10% | 3 |
| Derivatives and Risk Management | 10-15% | 3 |
| Ethical and Professional Standards | 15-20% | 4 |
| Pathways Portfolio Management, Private Markets, or Private Wealth |
30-35% | 22 |
CFA Level 3 Exam Topic Breakdown
The CFA Level 3 exam is the final step toward the prestigious CFA Charter. It tests your knowledge of portfolio management and wealth planning, covering topics such as ethical standards, behavioral finance, private and institutional asset management, capital market expectations, risk management, and more.
For 2025, the CFA Level 3 curriculum has been significantly updated to include specialized pathways and reorganized core topics, aligning more closely with real-world practices. Core topics now account for 65-70% of the exam, while the specialized pathways make up 30-35%. Notably, the curriculum has been streamlined, with core readings reduced from 33 in 2024 to 22 in 2025, focusing on key areas such as Asset Allocation, Portfolio Construction, Performance Measurement, Derivatives, and Ethics.
Asset Allocation
| Topic Weight | Modules |
|---|---|
| 15-20% | 5 |
Summary: This section explores capital market expectations and approaches to asset allocation. You’ll learn about economic forecasting models, analysis methods, and their application across various asset classes. Challenges and limitations in forecasting are also discussed. The curriculum provides an overview of strategic and tactical asset allocation methodologies, focusing on portfolio optimization and management techniques such as mean-variance analysis, Monte Carlo simulations, risk budgeting, and liability-driven strategies.
Objective: Understand and apply asset allocation techniques, optimize portfolios under various economic scenarios, and align strategies with investor objectives and constraints.
Tip: Master the differences between strategic and tactical asset allocation, and practice applying portfolio optimization models in different market conditions.
Modules:
- Capital Market Expectations, Part 1: Framework and Macro Considerations
- Capital Market Expectations, Part 2: Forecasting Asset Class Returns
- Overview of Asset Allocation
- Principles of Asset Allocation
- Asset Allocation with Real-World Constraints
Portfolio Construction
| Topic Weight | Modules |
|---|---|
| 15-20% | 7 |
Summary: This section covers advanced portfolio management techniques across equities, fixed income, and alternative investments. It addresses portfolio management for private wealth investors and contrasts it with institutional portfolio strategies. The curriculum also explores trading processes and relevant considerations, including trading costs, market structures, and platforms.
Objective: Develop the ability to construct diversified portfolios tailored to specific client objectives, balancing risk and return across multiple asset classes.
Tip: Focus on understanding the unique needs of private vs. institutional investors, and study the factors affecting efficient execution and trading decisions.
Modules:
- Overview of Equity Portfolio Management
- Overview of Fixed-Income Portfolio Management
- Asset Allocation to Alternative Investments
- Portfolio Management for Institutional Investors
- Trading Costs and Electronic Markets
- Case Study in Portfolio Management: Institutional
Performance Measurement
| Topic Weight | Modules |
|---|---|
| 5-10% | 3 |
Summary: This section delves into evaluating portfolio performance through benchmark selection, attribution analysis, and performance appraisal. You’ll explore frameworks for selecting investment managers and gain insights into the objectives and applications of the Global Investment Performance Standards (GIPS).
Objective: Learn to assess portfolio performance accurately, identify sources of return, and ensure compliance with GIPS for transparent reporting.
Tip: Focus on the nuances of attribution analysis and benchmark selection, as they are often tested through practical scenarios.
Modules:
- Portfolio Performance Evaluation
- Investment Manager Selection
- Overview of the Global Investment Performance Standards
Derivatives and Risk Management
| Topic Weight | Modules |
|---|---|
| 10-15% | 3 |
Summary: This section emphasizes the application of derivative instruments in portfolio management. Topics include option strategies such as straddles, spreads, covered calls, and protective puts, as well as creating synthetic positions. Swaps, forwards, and futures are analyzed for managing interest rate, currency, and equity risks. Additionally, strategies for managing currency exposure within portfolios are discussed.
Objective: Gain a solid understanding of derivative strategies and their role in hedging, risk management, and portfolio optimization.
Tip: Pay close attention to the mechanics and applications of advanced derivative strategies, and practice calculating and interpreting synthetic positions.
Modules:
- Option Strategies
- Swaps, Forwards, and Futures Strategies
- Currency Management: An Introduction
Ethical and Professional Standards
| Topic Weight | Modules |
|---|---|
| 10-15% | 4 |
Summary: This topic reinforces the importance of ethical behavior in a finance profession. It covers the CFA Institute’s Code of Ethics and Standards of Professional Conduct, focusing on fiduciary responsibilities, conflict resolution, and regulatory compliance. The curriculum also explores the valuation and essential features of derivatives, including forwards, futures, swaps, and contingent claims, as well as arbitrage principles that connect derivative pricing to underlying assets.
Objective: Apply ethical frameworks to professional scenarios, ensuring transparency, integrity, and compliance in investment management practices.
Tip: Review real-world case studies to strengthen your ability to identify and resolve ethical dilemmas. Practice linking derivative valuation concepts to ethical decision-making scenarios.
Modules:
- Code of Ethics and Standards of Professional Conduct
- Guidance for Standards I-VII
- Application of the Code and Standards: Level III
- Asset Manager Code of Professional Conduct
Pathways
Starting with the 2025 CFA Level 3 exam, you will need to select 1 of 3 specialized pathways when registering. The study materials provided will align with your chosen pathway. This selection cannot be changed once registration is complete.
| Weight (Per Pathway) | Modules |
|---|---|
| 30-35% | 22 |
Portfolio Management
The Portfolio Management Pathway builds on the core content in Level 3. It explores index-based equity strategies, comparing market-cap and factor-based approaches, replication techniques, and tracking errors. Active equity investing is addressed, including active share, risk budgeting, and various management approaches. Fixed-income strategies covered include liability-driven investing, yield curve positioning, credit strategies, and the challenges of index replication.
Trade strategy and execution are discussed from a portfolio manager’s perspective, focusing on execution benchmarks, automation, and regulatory aspects, and finally, a case study integrates asset allocation, derivatives, ESG considerations, and portfolio management techniques.
Private Markets
The Private Markets Pathway builds on the core content in Level 3. Private and public markets are compared. Types of investment structures, costs, and performance metrics detailed. The role and activities of the general partner are explored. Private equity strategies, including venture capital, growth equity, and buyouts, are conveyed, alongside valuation methods and debt financing options such as leveraged loans, mezzanine, and unitranche debt. Special situations, including distressed debt and unique investment strategies, are analyzed.
Finally, private real estate and infrastructure investments are discussed, highlighting valuation processes, economic drivers, and their roles in strategic asset allocation.
Private Wealth
The Private Wealth Pathway builds on the core content in Level 3. It explores the private wealth management industry, covering business models, fee structures, regulatory principles, and the role of advisers. Family dynamics and strategies for profiling and advising ultra-high-net-worth individuals are detailed, along with goals-based financial planning approaches focused on managing lifetime financial exposures, tax impacts, and liquidity strategies. A section on investment planning addresses portfolio allocation within legal, tax, and jurisdictional contexts.
Also explored are risk mitigation strategies, including financial and insurance products, to protect against inflation and globalization risks. Finally, a section on wealth transfer planning emphasizes strategies for controlled intergenerational transfers, charitable bequests, and addressing complex client needs.
Most Difficult Aspects of CFA Level 3 Exam
The CFA Level 3 curriculum combines conceptual knowledge with practical application, especially in the constructed response section. While difficulty is subjective and depends on individual experience, certain topics and sections stand out as particularly demanding.
- Constructed Response Section: Requires you to articulate well-structured responses. Navigating this section demands clarity, brevity, and precision. Practice is essential to manage time effectively and ensure comprehensive answers to multi-part questions.
- Portfolio Management and Wealth Planning: Demands a strong grasp of portfolio optimization, asset allocation, and risk management. Topics often overlap with other sections, such as Fixed Income and Equity Investments, making integration skills crucial.
- Asset Allocation and Risk Management: Requires you to apply quantitative and practical applications in real-world scenarios.The section also introduces advanced concepts such as liability-driven investing, Monte Carlo simulations, and currency risk management.
- Ethical and Professional Standards: Demands critical thinking and the ability to analyze complex, context-based scenarios that require a nuanced understanding of professional conduct. Success in this section depends on effectively navigating intricate situations using the CFAI Code of Ethics and Standards of Professional Conduct as a guiding framework.
Navigating the Curriculum Effectively
One of the first things to do when preparing for Level 3 is to integrate concepts across topics, as the exam emphasizes real-world application rather than standalone memorization. Allocate extra time to practicing essay-style questions, particularly in Portfolio Management and Wealth Planning, to develop the ability to articulate clear, concise, and well-structured responses. Use mock exams and CFAI past papers to simulate exam conditions, refine your time management skills, and improve your performance under pressure. While it is important to prioritize higher-weighted topics, ensure all sections are thoroughly prepared to secure critical points and maximize your chances of success.
