194+ Free CAIA Level I Practice Questions

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Question 1

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Under the CAIA Code of Ethics, which of the following is a primary fiduciary duty that alternative investment professionals owe to their clients?

Maximize short-term returns regardless of risk

Place client interests above personal interests and act with loyalty and care

Guarantee investment performance through contractual agreements

Disclose all client information to third-party vendors

to track

2026 Statistics

Key Facts: CAIA Level I Exam

~70%

Passing Score Required

~140/200 correct

200

Exam Questions

2 sessions of 100

48-60%

Historical Pass Rate

CAIA Association

$995-$1,395

Exam Fee

Plus $400 enrollment

200+

Study Hours

Recommended prep time

100+

Countries

Global exam centers

CAIA Level I exam consists of 200 multiple-choice questions administered in two 2-hour sessions at Pearson VUE centers. The pass rate historically ranges from 48-60%. Candidates need approximately 200 hours of study time over 3-6 months. The 2026 curriculum emphasizes CAIA Ethical Principles (replacing CFA Code), with increased coverage of real assets, private equity, hedge funds, and new digital assets content.

Sample CAIA Level I Practice Questions

Try these sample questions to test your CAIA Level I exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 194+ question experience with AI tutoring.

1Under the CAIA Code of Ethics, which of the following is a primary fiduciary duty that alternative investment professionals owe to their clients?

A.Maximize short-term returns regardless of risk

B.Place client interests above personal interests and act with loyalty and care

C.Guarantee investment performance through contractual agreements

D.Disclose all client information to third-party vendors

Explanation: The CAIA Code of Ethics emphasizes that investment professionals have a fiduciary duty to place client interests above their own personal interests, act with loyalty and care, and provide full disclosure of any conflicts. This aligns with standard fiduciary principles across the investment industry.

2A portfolio manager at a hedge fund receives a gift valued at $5,000 from a broker-dealer that executes trades for the fund. According to CAIA ethical standards, the manager should:

A.Accept the gift as it benefits the fund

B.Decline the gift as it may create a conflict of interest

C.Accept the gift but only disclose it if asked by investors

D.Distribute the gift value among all fund employees

Explanation: CAIA ethical standards require that investment professionals avoid conflicts of interest and maintain independence. Accepting significant gifts from service providers can compromise objectivity and create the appearance of favoritism in selecting counterparties. Such gifts should be declined or disclosed according to firm policy.

3An alternative investment fund claims compliance with GIPS standards in its marketing materials. What is required for this claim to be accurate?

A.The fund must have a minimum 3-year track record

B.The firm must comply with all GIPS requirements on a firm-wide basis

C.Only the specific composite needs to meet GIPS standards

D.The claim can be made if the fund intends to comply within one year

Explanation: GIPS standards require that claims of compliance must be made on a firm-wide basis, not for individual funds or composites. The firm must comply with all GIPS requirements, not just selected provisions, to make a valid claim of compliance.

4A private equity fund is marketing to potential investors. According to CAIA ethical principles, which practice would be most appropriate when presenting historical performance?

A.Presenting only the best-performing funds and excluding underperformers

B.Presenting gross returns without fee disclosure to show higher performance

C.Providing complete performance data with appropriate disclosures and caveats

D.Projecting future returns based on past performance trends

Explanation: CAIA ethical principles require fair and accurate disclosure of performance information. This includes presenting complete data, clearly distinguishing between realized and unrealized returns, disclosing all fees, and including appropriate caveats about the limitations of past performance.

5An alternative investment professional learns of a material nonpublic information regarding a potential merger. According to ethical standards, the professional should:

A.Trade on the information before it becomes public

B.Share the information with select institutional clients

C.Refrain from trading and maintain confidentiality

D.Immediately disclose the information on social media

Explanation: Trading on material nonpublic information constitutes insider trading, which violates both CAIA ethical standards and securities laws. Professionals must maintain confidentiality and refrain from trading until the information becomes public and the market has had time to absorb it.

6Which of the following is a defining characteristic that distinguishes alternative investments from traditional investments?

A.Lower risk profiles compared to equities

B.Unique legal structures, illiquidity, and complex valuation methods

C.Guaranteed returns backed by government insurance

D.Daily liquidity and transparent pricing

Explanation: Alternative investments are characterized by unique legal structures (partnerships vs. corporations), illiquidity, complex valuation methods (often requiring appraisal rather than market pricing), and higher fee structures compared to traditional investments like stocks and bonds.

7In a private equity limited partnership structure, which party has unlimited liability?

A.The limited partners (LPs)

B.The general partner (GP)

C.Both LPs and GP have unlimited liability

D.Neither party has unlimited liability

Explanation: In a limited partnership structure, the general partner (GP) manages the fund and has unlimited liability, while limited partners (LPs) are passive investors with liability limited to their committed capital. This structure aligns incentives while protecting passive investors.

8A private equity fund charges a 2% annual management fee and a 20% carried interest above an 8% hurdle rate. If the fund generates a 15% return on committed capital of $100 million, what is the total fee paid to the GP?

A.$2 million

B.$3.4 million

C.$4 million

D.$5 million

Explanation: Management fee = 2% × $100 million = $2 million. Carried interest is calculated on returns above the hurdle: (15% - 8%) × $100 million = $7 million profit above hurdle. Carried interest = 20% × $7 million = $1.4 million. Total fees = $2 million + $1.4 million = $3.4 million.

9The J-curve effect in private equity refers to:

A.The initial positive returns followed by declining performance

B.The tendency for returns to be negative initially due to fees and early investments, then improve over time

C.The cyclical nature of private equity fundraising

D.The correlation between private equity and public markets

Explanation: The J-curve describes the typical pattern of private equity fund returns: initially negative or low due to management fees being charged on committed capital before investments generate returns, followed by positive returns as investments mature and are realized.

10Which of the following best describes the difference between internal rate of return (IRR) and multiple of invested capital (MOIC)?

A.IRR measures total return while MOIC measures annualized return

B.IRR considers the time value of money while MOIC does not

C.IRR is calculated pre-fees while MOIC is calculated post-fees

D.IRR applies only to public markets while MOIC applies to private markets

Explanation: IRR is a time-weighted measure that accounts for the timing of cash flows and the time value of money, while MOIC (or TVPI) simply divides total value by invested capital without considering when cash flows occur. Both can be calculated on a gross or net basis.

About the CAIA Level I Exam

CAIA Level I is the first level of the Chartered Alternative Investment Analyst program, the global professional designation for alternative investment expertise. The exam covers the foundations of alternative investments including professional standards, characteristics of major alternative asset classes (real assets, private equity, private debt, hedge funds, digital assets), and fund structures. It establishes the core knowledge needed for professionals in portfolio management, investment analysis, and alternative investment advising.

Questions

200 scored questions

Time Limit

4 hours (2 × 2-hour sessions)

Passing Score

~70%

Exam Fee

$995-$1,395 (CAIA Association / Pearson VUE)

CAIA Level I Exam Content Outline

8-12%

CAIA Ethical Principles

CAIA Code of Professional Conduct, fiduciary responsibilities, conflicts of interest, duty of loyalty, suitability obligations, material nonpublic information, fair dealing, compensation disclosure, professional misconduct

20-28%

Introduction to Alternative Investments

Alternative investment characteristics, risk-return profiles, illiquidity premium, performance measurement (IRR, MOIC, TVPI, DPI), benchmark selection, fund structures (LP/GP), waterfall distributions, carried interest, J-curve effect, due diligence framework

14-20%

Real Assets

Real estate (core, value-add, opportunistic), REITs, infrastructure (economic/social, brownfield/greenfield), natural resources (timber, agriculture), commodities (contango, backwardation), direct vs. indirect ownership, cap rates, NOI

8-12%

Private Equity

Venture capital (seed, early, late stage), growth equity, buyouts (LBOs), PE fund lifecycle (fundraising, investment, harvest), valuation methodologies (DCF, comparables), deal structures, add-ons, platform companies

12-16%

Private Debt

Direct lending, mezzanine financing, distressed debt, venture debt, unitranche loans, second lien, payment-in-kind (PIK), covenant analysis, credit risk assessment, private debt vs. traditional fixed income

15-19%

Hedge Funds

Hedge fund strategies (global macro, event-driven, equity hedge, relative value), short selling, leverage, prime brokerage, lock-ups, gates, high-water marks, risk management (VaR, stress testing), fund of funds

4-8%

Digital Assets

Blockchain technology, cryptocurrencies, tokenization of assets, DeFi protocols, crypto allocation in portfolios, custody solutions, regulatory considerations, mining, proof of work vs. proof of stake

1-5%

Funds of Funds

Multi-manager structures, diversification benefits, due diligence layering, fee on fee, style drift monitoring, seeding/early-stage programs, secondary interests

How to Pass the CAIA Level I Exam

What You Need to Know

Passing score: ~70%
Exam length: 200 questions
Time limit: 4 hours (2 × 2-hour sessions)
Exam fee: $995-$1,395

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

CAIA Level I Study Tips from Top Performers

1Master performance metrics: IRR, MOIC, TVPI, DPI, and their relationships — these appear frequently

2Understand the J-curve effect and why private fund returns appear negative in early years

3Study the new CAIA Ethical Principles carefully — they differ from CFA Code of Ethics

4Know the key characteristics that differentiate hedge fund strategies (macro, event-driven, equity hedge, relative value)

5Learn cap rate calculations and how NOI drives real estate valuation

6Understand LBO value creation sources: EBITDA growth, multiple expansion, and debt paydown

7Focus on blockchain fundamentals and how tokenization differs from traditional securities

8Practice waterfall distribution calculations including hurdle rates and catch-ups

9Memorize the illiquidity premium concept and why alternatives command higher expected returns

10Study commodity terminology: contango vs. backwardation, roll yield, convenience yield

Frequently Asked Questions

What is the CAIA Level I exam pass rate?

The CAIA Level I pass rate historically ranges from 48-60%, making it one of the more challenging finance certifications. Success requires thorough understanding of alternative investments across all asset classes. Pass rates tend to be higher for candidates with CFA backgrounds or professional experience in alternatives, and for those who complete the CAIA Association's official study materials.

How many questions are on the CAIA Level I exam?

The exam contains 200 multiple-choice questions administered in two 2-hour sessions (100 questions per session) with an optional break between. Questions test recall, application, and analysis across all 8 curriculum domains. The exam is computer-based and administered at Pearson VUE testing centers worldwide.

How long should I study for CAIA Level I?

CAIA Association recommends 200+ hours of study time over 3-6 months. Most successful candidates study 15-20 hours per week for 3 months. Background matters: CFA charterholders may need 150-180 hours, while those new to alternatives may need 250+ hours. The 2026 curriculum changes require additional attention to the new CAIA Ethical Principles section.

What changed in the 2026 CAIA Level I curriculum?

Key 2026 changes include: (1) Ethics reduced from 15-25% to 8-12% with new proprietary CAIA Ethical Principles replacing CFA Code content, (2) Real Assets increased to 14-20%, (3) Private Equity increased to 8-12%, (4) Hedge Funds increased to 15-19%, and (5) new 'Allocating to Cryptocurrencies' reading added to Digital Assets. The curriculum now better reflects current alternative investment practices.

What is the hardest topic on CAIA Level I?

Many candidates find Hedge Funds (15-19%) challenging due to the variety of complex strategies (convertible arbitrage, merger arbitrage, fixed income relative value). Private Debt can also be difficult for those without credit experience. The new CAIA Ethical Principles section requires careful study as it differs from CFA standards many candidates may know. Introduction to Alternative Investments covers many quantitative performance metrics that require practice.

Is CAIA worth it if I already have my CFA?

Yes, CAIA is highly complementary to the CFA charter. While CFA covers alternatives in limited scope, CAIA provides deep expertise specifically in alternatives. Many CFA charterholders pursue CAIA to specialize in portfolio management roles focused on alternatives, to advise on private wealth alternatives allocation, or to transition into private equity, hedge funds, or real asset investing. CAIA charterholders are highly sought after by pension funds, endowments, and family offices.