CIPM Level II study guide
CIPM Level II · Work through your exam, one topic at a time.
The Certificate in Investment Performance Measurement (CIPM®) is a two-level credential offered by CFA Institute for professionals who evaluate investment results, analyse risk, and select managers. It is aimed at investment performance analysts, investment consultants, portfolio managers, risk analysts and managers, compliance officers, financial advisers and planners, and managers of managers. The curriculum develops skills in performance evaluation, attribution, appraisal, manager search and selection, and reporting based on the Global Investment Performance Standards (GIPS®). Level II builds on Level I and increases in complexity; it also contains all of the manager search and selection content, with emphasis on performance appraisal and on applying the appropriate tools and inputs in more complex investment decision-making situations. Topics on this exam: Performance appraisal and Manager search and selection. The CIPM Level II study guide has 2 sections and about 1,058 words.
01Performance Appraisal
Performance appraisal asks more than "what did the portfolio earn?" It asks whether the result fit the mandate, came from repeatable decisions, and compensated for the risk taken. CIPM Level II tests your ability to decompose returns, adjust for risk, test benchmark validity, and interpret results without being fooled by arithmetic or data biases. Measurement, attribution, appraisal: measurement calculates returns; attribution explains excess return through allocation, selection, and interaction; appraisal judges skill and mandate fit. Attribution models: Brinson-Hood-Beebower (BHB) uses allocation (wp i - wb i)(rb i - rb total) , selection wb i(rp i - rb i) , and interaction (wp i - wb i)(rp i - rb i) .
524 words, about 3 min02Manager Search and Selection
Manager search and selection tests the governance process from investment policy to funded mandate: define the need, build a comparable universe, screen quantitatively, assess qualitative and operational evidence, select, and monitor. Level II emphasizes evidence over narrative and avoiding statistical traps in peer universes and track records. Search sequence: identify the mandate from the IPS; define return, risk, liquidity, and constraints; build a universe; apply quantitative screens; conduct qualitative review; perform operational due diligence; interview finalists; select, fund, and monitor. Quantitative evidence: risk-adjusted returns, consistency across periods, up/down capture, batting average, tracking error, information ratio, maximum drawdown, style R-squared, holdings-based style analysis, turnover, and capacity.
534 words, about 3 min