FRM vs CAIA

Difference Between FRM and CAIA

FRM is the short form of Financial Risk Manager and this course lets an individual gain an expertise in skills pertaining to risk management whereas CAIA stands for Chartered Alternative Investment Analyst and this course focuses on letting students learn about  the hedge funds, real assetsReal AssetsReal Assets are tangible assets that have an inherent value due to their physical attributes. These assets include metals, commodities, land, and factory, building, and infrastructure assets. read more, private equity, credit derivatives, CDOs and related products in detail.

Finance certifications have always been a lucrative career option. There are many of them, and it still a nightmare if we were to decide what it should be finally. To help you out on this process, let us grab a quick understanding of the two – FRM exams vs. CAIA examsCAIA ExamsThere are two levels to the CFA® CAIA exam. Professional Standards and Ethics, as well as an introduction to alternative investments, are covered in Level I, while alternative investments and other integrated topics are covered in Level II.read more through this article.

FRM-vs-CAIA

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: FRM vs CAIA (wallstreetmojo.com)

In this article, we discuss the following.

  1. What is the Financial Risk Manager (FRM)?
  2. What is the Chartered Alternative Investment Analyst (CAIA)?
  3. Infographics
  4. Exam Requirements
  5. Why pursue FRM?
  6. Why pursue CAIA?

What is FRM or Financial Risk Manager?

The Financial Risk Manager is a global certified program based in the US and offered by the Global Association of Risk Professionals. The course consists of two parts and prepares you for everything from risk management and measurement to quantitative analysis techniques and financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.read more and products and evaluation models.

The FRM course requires the candidate to have two years of full-time working experience in the finance arena, which can be in the form of risk management, trading, academia, research, portfolio, management, auditing, economics, risk management, or risk consulting.

What is CAIA?

The Chartered Alternative Investment Analyst is a designation achieved by an investment professional after successfully clearing the CAIA exam conducted by the CAIA institution. The CAIA course requires the candidate to pass two examinations to be recognized as a specialist in a hedge fund, real estate investment, private equity, and venture capital. The CAIA exam is globally recognized and is a benchmark for professionals wanting to achieve a distinction in alternative investments.

The course divided into two levels helps a professional to understand the fundamentals of each alternative investment class and apply the asset allocated information to achieve result-oriented decision making. The curriculum designed helps a professional understand a portfolio from the investor’s perspective and implement diverse strategies.

FRM vs. CAIA Infographics

FRM-vs-CAIA-info

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: FRM vs CAIA (wallstreetmojo.com)

Exam Requirements

  • FRM: There is no prerequisite to take the FRM exam (educational or work experience); however, GARP Individual Membership must sit for the FRM exam. The cost of membership for practicing risk professionals and certified FRMs are $195/year and $150/year respectively.
  • CAIA: To appear for the CAIA exam, candidates must have at least one year of professional experience and a bachelor’s degree.

Comparative Table

SectionFRM CAIA
Organizing BodyThe exams are conducted by the Global Association of Risk Professionals (GARP), USA The exams are managed and controlled by the Chartered Alternative Investment Analyst Association, USA.
PatternThe course is divided into 2 parts

 

  • Part I
  • Part II
 The course is divided into 2 levels

 

  • Level I
  • Level II
Duration of CourseCandidates have to clear the Part II exam within a span of 48 months from passing the Part I exam. A large number of candidates are able to complete the course within a span of 12 to 18 months.
SyllabusThe syllabus primarily includes

 

  • Quantitative Analysis
  • Financial Markets & Products
  • Valuation
  • Risk Models
  • Credit Risk, Market Risk & Operational Risk
  • Investment Management
  • Treasury & Liquidity Risk Management
 The syllabus primarily includes

 

  • Professional Standards & Ethics
  • Alternative Investments
  • Hedge Funds, Private Equity, Real Assets & Structured Products
  • Due Diligence & Selecting Strategies
  • Volatility & Complex Strategies
  • Institutional Asset Owners & Investment Policies
Exam FeesThe overall cost of the course lies in the range of $1,175 to $1,775, which includes an enrollment fee of $400 and exam fees of the two parts that vary depending on the time of registration. The overall cost of the course lies in the range of $2,700 to $2,900, which includes an enrollment fee of $400 and exam fees of the two parts that vary depending on the time of registration. However, there are additional discounts offered on exam fees for professional associations and AIMA company members.
JobsSome of the common profiles include

 

  • Risk Manager
  • Risk Management Analyst
  • Investment Banker
  • Financial Risk Consultant
 Some of the common profiles include

 

  • Risk Manager
  • Risk Management Analyst
  • Investment Banker
  • Financial Risk Consultant
DifficultyIt is a very difficult exam to crack as only ~30% of the candidates are able to clear both parts. During 2019, the pass rates for Part I and Part II were 45.9% and 58.6% respectively. The difficultly of the exam is quite high as only ~34% of the candidates are able to clear both levels. During September 2020, the pass rates for Level I and Level II were 52% and 65% respectively.
Exam DateThe schedule for the upcoming exams during the year 2021

 

  • Part I: May 08-21, Jul 10-23, and Nov 13-26
  • Part II: May 15 (paper-based) and Dec 04-10
 The schedule for the upcoming exams during the year 2021

 

  • Level I: Feb 22 – Mar 05 and Aug 30 – Sep 10
  • Level II: Mar 08-19 and Sep 13-24

Key Differences Between FRM and CAIA

  1. The Financial Risk Management course is conducted by the GARP or Global Association of Risk Professionals. The CAIA Association conducts a Chartered Alternative Investment Analyst or CAIA course.
  2. The subjects in the FRM course are financial markets and products, quantitative analysis, foundations of risk management, market risk measurement and management, valuation and risk models, credit risk measurement and control, current issues in financial markets, operational and integrated risk management, operational risk and resiliency, risk management and investment riskInvestment RiskInvestment risk is the probability or uncertainty of losses rather than expected profit from investment due to a fall in the fair price of securities such as bonds, stocks, real estate. In addition, each type of investment is prone to some degree of investment or default risk.read more management, liquidity and treasury risk measurement and management, financial markets and products, etc..
    The subjects in the CAIA course are indexation, managed futures, current and integrated topics, private equity, due diligence, hedge funds, asset allocationAsset AllocationAsset Allocation is the process of investing your money in various asset classes such as debt, equity, mutual funds, and real estate, depending on your return expectations and risk tolerance. This makes it easier to achieve your long-term financial goals.read more, and institutional investors, professional standards and ethics, introduction to alternative investments, structured products, qualitative analysis, benchmarking, trading theories of alternative investments, etc.
  3. A financial risk manager can apply for the job roles of risk manager, risk management analytics consultant, managing director for the management of corporate risk, personal banker, risk officer for a global asset, risk quantification manager, enterprise risk manager, credit riskCredit RiskCredit risk is the probability of a loss owing to the borrower's failure to repay the loan or meet debt obligations. It refers to the possibility that the lender may not receive the debt's principal and an interest component, resulting in interrupted cash flow and increased cost of collection.read more specialists, senior operational risks manager, regulatory risk analysts, prudential risks manager, and so on.
    On the other hand, a Chartered Alternative Investment Analyst can apply for the job title of an analyst in the fields of private equity funds, hedge funds, venture capital, etc.
  4. Aspirants pursuing a Financial Risk Manager course must dedicate a minimum study time of 200 to 240 hours for each round of exam. The aspirants seeking a Chartered Alternative Investment AnalystInvestment AnalystAn investment analyst is an individual or firm that excels in the financial and investment research and have a keen knowledge of financial instruments and models. Such financial professionals include portfolio managers, investment advisors, brokerage firms, mutual fund companies, investment banks, etc.read more course must reserve a minimum study time of 200 hours for each level of exams.
  5. An aspirant applying for the FRM course must have worked as a full-time employee for 2 years in any financial riskFinancial RiskFinancial risk refers to the risk of losing funds and assets with the possibility of not being able to pay off the debt taken from creditors, banks and financial institutions. A firm may face this due to incompetent business decisions and practices, eventually leading to bankruptcy.read more role. In contrast, an aspirant applying for the CAIA course must have a bachelor’s degree and a minimum of 1-year professional experience or at least a professional background of 4 years in the absence of a valid degree.

Why pursue FRM?

FRM today is considered an alternative option to CFA Charter. While CFA and MBA remain the traditional choices to boost career prospects, FRM, as observed by industry experts, is poised for growth, considering that the market is less saturated with FRMs than CFAs at the moment.

Though FRM can boost your earning power, to believe that it would happen overnight and create you a millionaire is a wrong perception. The banks in the banks are still to be made aware of FRM as a certification, which is on par with a CFA (though less holistic and more narrow), and therefore, it is not a must-have while a candidate is being recruited.

FRM certified course is best suited for those individuals in the finance industries who play a senior role in management firms, government agencies, Investment banking firms, hedge funds, asset management firms, commercial banks, central banks, credit agencies, corporations, technology, and asset vendors, consulting firm and so on and want to jump up in their positions or are looking for a change in career domain.

Additional certification after a traditional degree is a pre-requisite considering the booming number of talented professionals in the industry. Thus FRM is for professionals who are looking to excel and make progress in their portfolio or who desire a shift in their career with a more diversified, analytical, and challenging role in their career. The syllabus of these certified courses have a much broader global perspective and has current relevance in today’s financial market scenario.

Why pursue CAIA?

CAIA is a perfect course for those individuals who wish to fill the educational gap to rise quickly in the alternative investment field. The program brushes up with you the core fundamentals of the other candidates in the industry. Moreover, CAIA is globally recognized and is a well-respected course, giving you credibility in the alternative investment field.

The program is the highest achievement an individual can achieve in this field, which directly increases his career opportunities.  It opens up doors to reach more client base and professional networking connections through membership in global chapters.

Recommended Articles

This has been a guide to FRM vs. CAIA. Here we discuss the differences between FRM and CAIA along with infographics and a comparative table. You may also have a look at the following articles –

Reader Interactions

Comments

  1. sunny says

    Hi Dheeraj,

    Fee info of CAIA seems to be wrong. Enrollment fee is $400 and $1250 exam fee for each level. And pass percentage seems to be different as well. Not sure if it is an average of all the years.

    Cheers,
    Sunny

    • Dheeraj Vaidya says

      Hello Sunny,

      Thanks for point out incorrect information. I have updated the same. Hope this is fine now.

      Best,
      Dheeraj

  2. jeromebrooks says

    i do agree with this infographic here as it provides better knowledge of CAIA field. This make me understand what is CAIA & how it can be used effectively in investment filed. Thanks

    • Dheeraj says

      Thanks Jerome!

Leave a Reply

Your email address will not be published. Required fields are marked *