IFoA SP10 study guide
IFoA SP10 · Work through your exam, one topic at a time.
SP10 (Investment and Asset Management) is one of the Institute and Faculty of Actuaries' Specialist Principles exams, taken after the Core Principles stage and typically alongside or before the Specialist Advanced subjects. It suits candidates heading toward investment consulting, insurer investment functions, pension scheme advisory work, or asset management roles where actuarial judgement meets portfolio decisions. The IFoA SP10 study guide has 6 sections and about 2,320 words.
01Investment environment, asset classes and financial markets
This domain tests whether you can characterise each asset class by the shape of its cash flows, its risk and return drivers, and the mechanics of the market in which it trades - then judge which characteristics matter for a given investor. Cash and money market instruments: near-zero duration; the real risks are reinvestment and inflation.
393 words, about 2 min02Asset-liability modelling and investment strategy for insurers and pension schemes
Asset-liability modelling asks a single question: which asset portfolio best funds a given liability cash-flow profile, given the investor's risk appetite, capital and regulatory regime? The exam tests both qualitative strategy design and the ability to quantify mismatch.
374 words, about 2 min03Valuation of equities, bonds, property and alternative assets
Valuation questions reward candidates who can apply a formula, state its assumptions and explain which method suits which asset. Price is the present value of coupons and redemption at the yield to maturity, which assumes coupons are reinvested at that yield and the bond is held to maturity.
409 words, about 2 min04Portfolio construction, diversification and asset allocation
Portfolio construction turns return forecasts, risk estimates and constraints into weights. The exam tests whether you can compute the diversification benefit, explain the limits of optimisation, and design a strategic asset allocation that respects liabilities and regulation.
356 words, about 2 min05Risk management, derivatives and hedging
This domain tests whether you can identify, measure and transfer risk, and whether you can size a hedge correctly and explain what the hedge does not cover. Market risk (interest rate, inflation, credit spread, equity, currency), credit and counterparty risk, liquidity risk (funding and market), operational and model risk, concentration risk.
365 words, about 2 min06Performance measurement, attribution and investment governance
This domain tests whether you can measure what a manager actually delivered, explain where it came from, and show that the decision-making and oversight around it are sound. Time-weighted return chain-links sub-period returns, removing the effect of cash-flow timing; it is the right measure for judging a manager who does not control flows.
423 words, about 2 min