CFA® Portfolio Management

Summary, Syllabus, and Topics (L1, L2, L3)

The CFA Portfolio Management topic is at the very core of the CFA Program. In fact, portfolio management is the most highly ranked career of interest among CFA candidates. The material starts off relatively light at Level 1 (5-8%) and increases in scope and weight at Level 2 (10-15%). Portfolio Management makes up a whopping 35-40% of the Level 3 exam. Candidates would be wise to build a strong foundation on this topic, as it will pay dividends as they progress through the material.

The portfolio management process’s fundamentals are broken into three main steps: planning, execution, and feedback. During the planning phase, a manager gains knowledge of the client’s (e.g., individual or institutional) needs. Subsequently, the manager captures critical information on managing the client’s portfolio in the Investment Policy Statement. Once a documented plan is in place, the manager executes the program by first setting an asset allocation. The client’s initial asset allocation is the amount placed in each broad asset class (e.g., equity, fixed income) that matches the client’s risk and return profile.

After careful due diligence (i.e., thorough review), the manager then selects specific securities for each asset class. These actions create the portfolio. As part of the feedback step, the manager monitors changes in the portfolio and determines whether revisions such as rebalancing the portfolio are necessary. The manager will also prepare timely performance reports and communicate findings to the client. Over time, the client’s needs may change, and the process repeats itself.

The curriculum also covers risk management, behavioral biases, and technical analysis; recently, fintech topics were added to the curriculum, including machine learning, big data, and distributed ledger technology.

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The CFA Level 1 Portfolio Management topic is one of the lightest topics by weight on the Level 1 exam, but the ideas learned are more complex and theoretical than most Level 1 topics. And, the weight of Portfolio Management increases with every level until it composes nearly half of the weight of the Level 3 exam. Therefore, candidates would be wise to build a solid foundation on this topic.
Do the CFA’s End Of Chapter (EOC) questions along with any questions in their EcoSystem. Beyond that, we highly recommend going through UWorld’s CFA prep platform which is known for intuitively explaining Portfolio Management.
Yes, the CFA charter is good for a career in Portfolio Management. Portfolio management is the most highly ranked career choice among CFA candidates, and the CFA Program materials provide a bevy of insights, tools, case studies, real-world examples, models, and equations designed to develop expertise in the field.

Portfolio management questions can include calculation-heavy questions, usually centered around risk or return calculations. Make sure you get lots of practice in calculating and comparing returns (such as expected return), as well as calculating risk metrics (such as variance, covariance, standard deviation, beta). Download our FREE ReadySheets for all the formulas you need to get through Level 1.

We highly recommend Active Learning to master the broad category of Portfolio Management. Our active-learning method is a study approach designed to help examinees master the concepts tested on high-stakes exams. As the name suggests, this study approach requires active participation by the student, as opposed to passive learning exercises such as sitting through the classroom or live lectures.
The CFA Level 2 Portfolio Management topic is one of the heavier topics on the Level 2 exam. The material dives more deeply into the nuances of Portfolio Management and there is more content to cover than at Level 1. While Portfolio Management is typically not considered as difficult as Derivatives or Financial Statement Analysis, the content is extremely valuable and a strong foundation will set up candidates for success in Level 3.
The CFA Level 3 Portfolio Management curriculum comprises nearly half of the weight (35-40%) of the Level 3 exam. The volume of material may prove difficult, but candidates who have successfully passed CFA Levels 1 and 2 should be well prepared to grapple with its substance.
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