Birch Lake Insights: CFAs in Private Markets and Why It Should Matter to Investors and Businesses

By Rachel Bullock, CFA

Becoming a Chartered Financial Analyst (CFA) is not something to be taken lightly. It is a challenging commitment – a CFA charterholder must complete at least 4,000 hours of relevant work experience, invest ~900 hours into studying, and successfully complete a series of exams that typically have pass rates near or below 50%. While the CFA designation is achieved predominantly by public market professionals, I believe that the expertise, network connections, and credibility gained as a CFA makes a real difference for my career in private markets working at a private capital and advisory firm.

The CFA Program Explained

What makes the CFA designation unique is not just the rigor of the program, but the breadth of topics covered. The CFA Institute, which administers the program, takes a holistic view of the investment profession, addressing not only financial literacy but also ethical and professional standards.

Earning the designation means completing qualifying work experience, becoming a member of the CFA Institute, and passing three levels of examinations. The Level I and Level II curriculums are broad-based, with Level I offering a working knowledge of a wide range of topics and Level II diving deeper on each of those. Level III provides candidates with the opportunity to choose a specialized pathway of focus, such as portfolio management, private wealth, or private markets.

All levels are challenging, as evidenced in the average pass rate over the past ten years – 41% for Level 1; 46% for Level II; and 51% for Level III. Requiring an average of 300 study hours per level, in many ways, the program is designed to test not only knowledge but also commitment to the field. The Level III private markets specialized pathway requires candidates to explore and understand different transaction structures, asset classes, and perspectives on the industry.

The ROI of a CFA

Even with challenging pass rates and many candidates who choose not to complete the program, I still believe the CFA program is a worthy pursuit for those working in private investments. Here’s why:

1. Deeper knowledge: The curriculum is designed for candidates to enhance their breadth and depth of industry knowledge. For early-career professionals, it can be a fast-track pathway to gain that knowledge. Even candidates who do not complete the CFA program obtain exposure to different aspects of the industry that could help them advance their careers. Level III’s specialized pathways allow candidates to gain in-depth enriched insight into the aspects of the industry that interest them most, such as private markets.
2. An active network: The program structure encourages organic connections within a cohort as candidates seek out study partners, and the CFA Institute promotes long-term organized connections for charterholders with local societies, exclusive events, and a directory of fellow charterholders.
3. Credibility: The CFA charter is a globally recognized credential that is respected for its high standards. The rarity and reputation of the CFA designation provides a level of credibility to both the charterholder and firms where they work.

While the benefits of CFA Institute membership and holding the CFA designation are evident, the CFA Institute’s Code of Ethics and Standards of Professional Conduct prohibit overstating the competency of an individual or asserting or implying that superior performance can be expected from someone with the CFA designation. However, it permits us to emphasize our commitment to ethical and professional conduct, speak to the intensity of the exams, and make claims about the relative merits of the designation.

All of this combines to make a CFA charter beneficial for private market professionals, their clients, and their firms. Thanks to the curriculum, connections, credibility, and continuing engagement fostered by the program, earning a CFA designation is an investment that I believe pays dividends in ways that cannot always be measured. I am proud to have made that investment which helps inform my work with founders, entrepreneurs, businesses, partners, and peers.

Rachel Bullock brings her experience in both public and private markets to Birch Lake from Adams Street Partners, a leading private market investment manager with more than $60 billion in assets under management. At Birch Lake, she focuses on identifying, evaluating, and helping execute new investment opportunities, monitoring portfolio companies, and partnering with management teams on advisory engagements to develop and implement strategic solutions and value-creation initiatives.