Certification Examination Detailed Content Outline

Qualification Certification Qualification Certification Certification Examination Detailed Content Outline exam exam Certification Examination Detailed Content Outline exam exam I. GOVERNANCE 4% 7% 3. Differentiate between measures of central tendency A. IMCA Code of Professional Responsibility and 4. Describe and differentiate between measures of dispersion: 2% 5% Standards of Practice • Range • Semi-variance 1. Serve the financial interests of all clients • Absolute deviation • Semi-deviation 2. Disclose fully to clients services provided and compensation received • Variance • Coefficient of variation 3. Provide to clients all material information related to the investment decision- • Standard deviation making process as well as other information they may need to make informed 5. Apply probability concepts: decisions based on realistic expectations • Probability • Variance

• Expected value 4. Maintain the confidentiality of all information entrusted by the client to the fullest extent permitted by regulatory and legal entities in conjunction with the 6. Analyze and interpret hypothesis testing using probabilistic methodologies and professional’s firm/company policy models (e.g., Monte Carlo simulation) 7. Analyze correlation, regression, and multiple regression 5. Comply fully with all statutory and regulatory requirements affecting the (a) Correlation analysis: delivery of investment consulting services to clients • Scatterplots • Correlation coefficient (b) Linear regression: 6. Maintain competency in investment management consulting and financial • Independent and dependent variables services through education and training to better serve clients and enhance • Coefficient of determination investment management consulting • Standard error • Hypothesis testing 7. Maintain a high level of professional ethical conduct • Prediction intervals (c) Multiple regression analysis: B. Regulatory Considerations 2% 2% • Multiple Linear Regression Model 1. Define fiduciary responsibilities including the principal-agent relationship for: • R2 • Individuals • Endowments • Randomness • Trusts • ERISA plan clients • Heteroskedasticity • Foundations • Serial correlation • Multi-collinearity 8. Interpret data analysis (e.g., trend, time-series) 2. Identify circumstances that may cause a person to be identified as a fiduciary (a) Trend models 3. Comply with laws and regulations: (b) Mean reversion • ERISA • UPMIFA (c) Multi-period forecast • UPIA • International, federal, and state (d) Regression coefficients regulatory agencies (e) Random walk • UMIFA (f) Smoothing past values with an n-period moving average (g) Seasonality B. Applied Finance and Economics 4% 7% 4. Identify prohibited transactions under applicable legislation (e.g., ERISA) 1. Calculate time value of money II. FUNDAMENTALS 16% 16% (a) Present and future value (e.g., annuity and variable cash flows) A. Statistics and Methods 8% 4% (b) Methods of compounding 1. Apply statistical concepts (c) Nominal and effective rates of interest 2. Analyze and interpret data: (d) Discounted cash flows (e) Net present value and internal rate of return • Normal and non-normal distributions (f) Rates, number of periods, payments, or prices • Data tables (g) Interest rates and discounts rates • Graphs 2. Differentiate between major areas of economic thought including John Maynard Keynes and Milton Freidman

–1– Qualification Certification Qualification Certification Certification Examination Detailed Content Outline exam exam Certification Examination Detailed Content Outline exam exam 3. Explain economic concepts and principles C. Global Capital Markets History and Valuation 4% 5% (a) Principles of supply and demand and shifts of each 1. Describe interest rates and inflation in developed and emerging markets (b) Concept of equilibrium through graphical representation including the history of government and corporate defaults in the U.S., Europe, (c) Micro and macro-economic theory and emerging markets 4. Describe the U.S. monetary system 2. Describe equity valuation in developed and emerging markets (a) Impact of monetary and fiscal policy (a) Cyclical and secular bull and bear markets (b) Concept of the velocity of money (b) Extremes of equity valuation over time in the U.S. (c) Role of central banks (c) Equity valuations within various secular market cycles (d) Determination of interest rates (e.g., differentiate between policy rates and market rates) 3. Describe equity and fixed income returns for developed and emerging markets (e) Nominal and real rates (a) Historical equity and fixed income returns for secular market cycles (f) Yield spreads and the yield curve (b) Secular and cyclical equity market cycles to macro-economic cycles 5. Describe stages of a business/economic cycle (c) Methods for developing equity and fixed income expectations: (a) Stages of a business/economic cycle • Using growth rates (b) Monetary and fiscal policy affecting business cycles, the economy, and • Valuation financial markets (d) Historical correlations of equities, fixed income, and alternatives (c) Inflation, deflation, reflation, stagflation, and disinflation and their location within the business/economic cycle III. PORTFOLIO PERFORMANCE and RISK (d) Business cycle dating 20% 22% MEASUREMENTS

6. Interpret macroeconomic measurements A. Attributes of Risk 4% 2% (a) Leading economic indicators: 1. Differentiate between the concepts of risk and uncertainty • Stock market 2. Identify types of risk: • Construction permits • • S (b) Coincident economic indicators: Loss of principal overeign • Industrial production • Purchasing power • Interest rate • Retail sales • Liquidity • Credit (c) Lagging economic indicators:, • Geo-political • Reinvestment • Duration of unemployment • • Consumer credit outstanding relative to personal income Currency (d) Price level indicators: 3. Compare the ability, willingness, and/or need to assume risk (risk tolerance) • PPI B. Risk Measurements 4% 7% • CPI • GDP deflator 1. Define volatility measurements (a) Standard deviation 7. Interpret demographic effects on economies: (b) Variance • Aging of population (c) Covariance • Immigration 2. Differentiate between volatility and downside risk

8. Describe global economics, theory, and trade 3. Quantify tail risk both statistically and historically (a) Comparative and absolute advantage (b) Balance of payments 4. Analyze systematic risk (beta) and non-systematic risk (idiosyncratic) (c) Roles of the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) C. Performance Measurement and Attribution 12% 13% 1. Calculate investment returns 9. Explain: (a) Components of return: • Current global exchange rate system • Income • Capital appreciation • Spot and forward exchange rates (b) Absolute and relative performance • Dollarization (c) Rolling-period returns compared with annual returns • Currency pegs (d) Time-weighted and dollar-weighted rates of return • Fixed rates vs. floating rates (e) Arithmetic and geometric average returns • Special drawing rights (SDRs)

–2– Qualification Certification Qualification Certification Certification Examination Detailed Content Outline exam exam Certification Examination Detailed Content Outline exam exam 2. Analyze risk-adjusted measures using strengths and weaknesses of different 3. Describe equity valuation methods types of analysis: (a) Security analysis • Alpha • Omega i. Dividend discount ii. Free cash flow • R2 coefficient • Jensen’s alpha (CAPM) iii. Weighted average cost of capital • Liquidity • (b) Economic analysis • M2 ratio • Information ratio i. Business cycle as it pertains to equities • • ii. Economic indicators as they pertain to equities (c ) Industry and sector analysis (d) Fundamental analysis 3. Determine benchmarks i. Financial statements: (a) Measuring individual managers, including: • Statement of financial position • Statement of cash flows • Normal portfolio analysis • Performance attribution analysis ii. Common financial ratios: 2 • Investment style • R analysis • PEs • Price to sales (b) Advantages and disadvantages of using indexes as benchmarks (including • Price to Book • Return on equity ) iii. Qualitative analyses: (c) Attributes of an effective benchmark: • Management strength • Governance • Transparency • Replicability 4. Differentiate among global indices: (d) Advantages and disadvantages of using peer groups as benchmarks • Cap-weighted • Equal weighted • Fundamentally weighted (e) Custom benchmarks for a client’s portfolio 5. Evaluate potential benefits of international diversification in a portfolio 4. Complete attribution analysis on a client’s portfolio 6. Describe changes in correlations over time across sectors, countries, and regions (a) Types of attribution analysis, including: 7. Analyze equity market valuation: • Risk-adjusted measures • Peer group comparisons • PE ratio • Book-to-market ratio • Style • Growth rate • Q ratio (b) Scattergrams and floating bar charts

(c) Returns-based and holdings-based (d) Sources of return and risk 8. Describe technical analysis and its possible use for timing of purchases B. Fixed-Income Vehicles 4% 2% 5. Describe survivorship bias and its origination 1. Differentiate among fixed-income investment vehicles (e.g., SMAs, mutual IV. TRADITIONAL and ALTERNATIVE INVESTMENTS 20% 19% funds, ETPs, UITs, CEFs, individual securities) (a) Fixed income sectors: A. Traditional Global Investments (Equity and 4% 5% Fixed Income) • Sovereign debt • Corporate 1. Describe equity investment vehicles: • Emerging market debt • Municipals • SMAs • CEFs • Mortgage backed securities • Inflation-protected securities (b) Money-market instruments • Mutual funds • REITs

• ETFs • MLPs 2. Evaluate characteristics, including basic features, coupon structures, payment • UITs • Individual securities methods, options by: (a) Quality 2. Describe equity characteristics by: (b) Maturity, duration, and convexity (a) Size (capitalization) (c) Issue size (b) Style (growth or value) (d) Fixed or floating rate coupons (c) Volatility (defensive vs. dynamic) (e) Call features (d) Capital structure: (f) YTM and YTW • Common • Debt • Preferred 3. Analyze pricing of fixed-income securities: (e) Domestic vs. international • Comparing relative rates (f) Developed vs. emerging vs. frontier • Discounts and premiums (g) ADRs vs. ordinary shares • Inflation adjusted valuation • Duration 4. Describe common fixed income indices and benchmarks

–3– Qualification Certification Qualification Certification Certification Examination Detailed Content Outline exam exam Certification Examination Detailed Content Outline exam exam C. Foreign Exchange Market 2% 1% 4. Describe tools and techniques to leverage investments in a portfolio 1. Manage currency risk in a portfolio (a) Margin rules and requirements (b) Use of leveraged products: D. Alternative Investments 4% 7% • Leveraged mutual funds • ETFs • Hedge funds 1. Distinguish between strategy and structure 5. Distinguish between hedging and speculating 2. Differentiate among accredited investors, non-accredited investors, and quali-

fied purchaser F. Tools and Strategies Based on Technical Analysis 4% 2% 3. Distinguish between liquid and illiquid strategies 1. Describe trends (time cycles), continuation, and corrections 4. Analyze and evaluate alternative investment asset classes (e.g., characteristics, 2. Explain the Dow Theory and moving averages risks, tax ramifications, expected returns) 3. Describe various momentum indicators (a) Real estate 4. Discuss how tactical and dynamic asset allocation strategies utilize principles of (b) Commodities technical analysis (c) Private equity, venture capital (d) Private debt V. PORTFOLIO THEORY and BEHAVIORAL FINANCE 20% 12% (e) Infrastructure 5. Explain structural considerations A. Portfolio Theories and Models 12% 7% (a) Transparency, applicable regulation, illiquidity, leverage, and compensation 1. Explain (MPT) structures (a) Key MPT assumptions: (b) Significance of third-party custodianship and independent auditing • Normal return distributions (c) Funds of funds • Risk is known and constant (d) Heightened due diligence • Fixed asset correlations (e) (LP) vs. marketable vs. redeemable security structures • All information is public • Investors are rational 6. Describe alternative investment strategies: • There are no taxes or transaction costs • Risk enhancers and diversifiers • Tax ramifications • Investors are risk-averse • Characteristics • Expected returns (b) Key aspects of MPT: • Risks • Return vs. risk • How portfolios may be constructed from this methodology 7. Evaluate the following: • Efficient Frontier (a) Absolute return • MVO (b) Arbitrage: (c) Criticisms of MPT • Convertible • Fixed income (d) Capital Allocation Line (CAL) (c) Dedicated short bias (e) Positive diversification effects (d) Market neutral (e) Event driven 2. Interpret efficient market hypothesis: (f) Global macro • Weak (g) Long/short • Semi-strong (h) Managed futures • Strong 8. Evaluate alternative investment indices and benchmarks 3. Evaluate Capital Asset Pricing Model (CAPM) E. Options, Futures, and Other Derivatives 2% 2% (a) Systematic (market risk) and non-systematic (idiosyncratic risk) 1. Describe and analyze options (b) Security Market Line (SML) (a) Puts, calls, and put-call parity (b) Protective puts, put writing, covered calls, straddles, spreads, and collars 4. Evaluate Arbitrage Pricing Theory (APT) explanatory models 2. Recommend options and options strategies to enhance returns and/or manage risk in a portfolio 5. Evaluate downside risk using Post-Modern Portfolio Theory (Post-MPT) theories, 3. Explain futures contracts, pricing, and valuation and the use of other derivatives methodologies, and strategies: in a portfolio: • Semi -variance (down side deviation) • Sortino ratio • Foreign exchange • Swaps • Value-at-Risk (VaR) • Skewness and kurtosis • Stock-index • CDOs • Interest rate • Repos

–4– Qualification Certification Qualification Certification Certification Examination Detailed Content Outline exam exam Certification Examination Detailed Content Outline exam exam B. Behavioral Finance Theory 8% 5% 5. Explain tax-aware investment strategies 1. Manage biases and mental heuristics related to (a) Components and importance of tax efficiency (a) Existing beliefs: (b) Implementation of tax-efficient strategies including: • Tax-efficient investments • Cognitive dissonance • Illusion of control • Tax gain and loss harvesting strategies • Conservatism • Hindsight • Asset location with respect to tax efficiency and recommend tax-efficient • Confirmation • Home country asset positioning • Representative • Tax-efficient plan for taking retirement distributions (b) Information processing: (c) Tax deferral vs. tax exemption • Mental accounting • Self-attribution B. Investment Policy Statement (IPS) 4% 4% • Anchoring and adjustment • Outcome 1. Explain the components of an investment policy statement (IPS) including: • Framing • Recency • Fund objectives • Availability • Allowable asset classes • Target asset allocation and benchmarks 2. Describe biases and mental heuristics related to emotions and explain how to • Risk metrics and constraints overcome them • Special restrictions (a) Loss aversion (e) Endowment • Rebalancing protocol (b) Overconfidence (f) Regret aversion 2. Prepare an Investment Policy Statement (IPS) for clients that includes: (c) Self-control (g) Affinity (a) Governance of funds: (d) Status quo • ERISA • Uniform Prudent Investor Act 3. Describe common behavioral investor types and explain how to work with each • Uniform Principal and Income Act effectively in practice • Uniform Prudent Management of Institutional Funds Act (a) Preservers (c) Independents (b) Client’s risk tolerance (b) Followers (d) Accumulators (c) Whether the policy is consistent with a dynamic/tactical or static asset allocation VI. INVESTMENT CONSULTING PROCESS 20% 24% (d) The investment time horizon A. Client Discovery 4% 2% (e) The taxation position status of the client (non-profit or taxable) and estimat- ed horizon period tax rate 1. Evaluate clients’ situation including: (f) The likelihood of capital preservation • Current financial position • Time horizons (g) Required target rate of return • Tolerance for risk • Tax status and expectations (h) Rebalancing parameters • Goals and objectives (i) A liability policy (j) Monitoring requirements 2. Discuss economic and capital market assumptions and expectations (k) The role of capital market expectations in the IPS 3. Evaluate investment management models (l) Unique elements and items necessary for an IPS developed for institutional (a) Goals-based investment management clients (b) Liability driven strategies and modeling (m) Approaches to situational profiling, including: (c) Scenario analysis and modeling for inflation, deflation, stagflation, and growth • Sources of wealth (d) Uses, advantages, and disadvantages of value-at-risk (VaR) and Monte Carlo • Measures of wealth simulations • Stage of life (e) Relationship between time horizon and expected return vs. terminal value result (n) Investment objectives, spending policy, appropriate governance, and client 4. Explain asset allocation methodology: strategic, tactical, and/or dynamic constraints (a) Steps involved in the allocation of assets 3. Review the IPS for compliance at least annually and modify as necessary (b) Spending policy and its implications on asset allocation (c) Asset allocation for various clients and entities C. Portfolio Risk Management Strategies 4% 6% (d) Strategic vs. tactical asset allocation, including: 1. Analyze and evaluate • Buy and hold (a) Diversification strategies including strategic, tactical, and dynamic asset • Constant mix allocation as they address risk • Constant proportion portfolio insurance (CPPI) (b) The risk hedging techniques of purchasing insurance and buying or selling (e) Core and satellite strategy options to hedge risk in a portfolio (f) Total return (c) Investment products available to manage or hedge portfolio risk

–5– Qualification Certification Qualification Certification Certification Examination Detailed Content Outline exam exam Certification Examination Detailed Content Outline exam exam 2. Describe the concept of risk budgeting including risk unit allocation 9. Explain components of the individual manager interview (a) Traditional asset-based allocation approach and the risk-based asset alloca- 10. Evaluate the structure of: tion approach • Hedge fund • ETF (b) Risk parity investment strategies • SMA • Fund of funds (c) Risk factors including: • Mutual fund • Equity • Interest rate • Bond • Inflation 11. Execute active share research • Currency • Counter party 12. Describe manager styles (e.g. growth, value, market-oriented, small cap) and • Macro/environmental • Credit asset class structures (e.g. single manager vs. multi-manager) • Commodity 13. Identify issues with manager composites 14. Identify the benefits and caveats of manager structuring including a 3. Evaluate and implement retirement distribution strategies multi-manager approach D. Manager Search, Selection, and Monitoring 4% 10% 15. Implement a core satellite approach 1. Identify the elements and categories of manager search and selection including 16. Conduct manager search and perform due diligence the firm’s: 17. Monitor qualitative and quantitative manager attributes • Philosophy • Future progress E. Perform Portfolio Review and Revisions Process 4% 2% • People • Price 1. Confirm the following: • Business plans • Performance (a) Client goals, time horizon, circumstances, and constraints • Processes (b) Economic and market conditions and expectations 2. Adopt a manager search methodology using standard criteria for manager/ (c) Absolute and relative performance index selection, including qualitative and quantitative criteria (d) The effectiveness of the portfolio and/or plan 3. Adopt hedge fund manager search methodology using standard criteria for (e) Reporting (e.g., tracking to primary objective and secondary objectives) manager/index selection, including qualitative and quantitative criteria 2. Make portfolio adjustments within IPS guidelines, and considering constraints 4. Establish expectations and criteria for manager search communicated by the client, costs, timing, and taxation (a) Benefits and costs of rebalancing 5. Evaluate short term versus long term results (b) Rebalancing methodologies and considerations 6. Evaluate passive versus active strategies 7. Evaluate past performance for manager search and selection Totals 100% 100% 8. Use active manager databases and other research

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