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100+ Free IFoA SA7 Practice Questions

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Key Facts: IFoA SA7 Exam

3h20m

Exam Duration

IFoA SA7 syllabus

3

Syllabus Areas

IFoA SA7 syllabus

30/35/35

Area Weights (%)

IFoA SA7 syllabus

~300

Credit Value

IFoA curriculum

SP5

Builds On

IFoA curriculum

CIO

Target Level

IFoA SA7 aim

SA7 is the IFoA's Specialist Advanced subject in Investment and Finance, taken as a 3 hour 20 minute online open-book written paper of long-answer and case-based questions rather than multiple choice. It builds on SP5, replaced the former SA5 and SA6, and carries around 300 credits. The syllabus has three areas: the framework for investment management (30%), meeting investor requirements (35%), and management and risk control for an investment manager (35%). The IFoA does not publish a fixed pass percentage; the Board of Examiners sets the pass mark each sitting. These 100 free questions are multiple-choice knowledge prep for the written exam.

Sample IFoA SA7 Practice Questions

Try these sample questions to test your IFoA SA7 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Within the SA7 framework for investment management, a Chief Investment Officer distinguishes the strategic asset allocation (SAA) from the tactical asset allocation (TAA). Which statement best characterises the SAA?
A.The long-term benchmark mix of asset classes set to meet the fund's objectives and risk tolerance over the planning horizon
B.Short-term deviations from benchmark weights to exploit perceived mispricing between asset classes
C.The selection of individual securities within an equity portfolio to outperform a sector index
D.The daily rebalancing of cash to keep the portfolio fully invested at all times
Explanation: SAA is the policy-level, long-horizon allocation across asset classes chosen to deliver the fund's objectives within its risk budget; it anchors the benchmark. TAA is the deliberate, shorter-term deviation from that policy mix to add value from market views.
2An investment manager compares public and private market assets for a long-term institutional client. Which feature is most characteristic of private market assets such as private equity and direct infrastructure?
A.Continuous public price discovery and tight bid-offer spreads
B.Illiquidity, appraisal-based valuations, and a return premium expected for accepting reduced liquidity
C.Daily mark-to-market against a transparent exchange order book
D.Zero correlation with listed equity over all time horizons
Explanation: Private assets trade infrequently, are valued by periodic appraisal rather than continuous market prices, and are expected to offer an illiquidity premium to compensate investors for locking up capital. This is central to SA7's framework for the investment universe.
3A CIO is reviewing the efficient frontier from a mean-variance optimisation. A key practical criticism of using unconstrained mean-variance optimisation directly for strategic asset allocation is that it:
A.Always produces equally weighted portfolios regardless of inputs
B.Cannot incorporate a risk-free asset under any circumstances
C.Is highly sensitive to small changes in expected return inputs, producing extreme, unstable, error-maximising weights
D.Guarantees that the chosen portfolio will outperform the benchmark
Explanation: Mean-variance optimisers are notorious as 'error maximisers': tiny changes in estimated expected returns generate large swings in optimal weights and often concentrated, extreme allocations. Practitioners impose constraints, use resampling, or Black-Litterman to stabilise outputs.
4Under the efficient market hypothesis, which form asserts that all publicly available information, including past prices and published financial statements, is already reflected in security prices?
A.Weak form
B.Adaptive form
C.Strong form
D.Semi-strong form
Explanation: The semi-strong form states that prices fully reflect all publicly available information, so fundamental analysis of public data cannot consistently generate abnormal returns. The weak form covers only past price/volume data, while the strong form also includes private information.
5An equity portfolio has a beta of 1.20. The risk-free rate is 3% and the expected market return is 8%. Using the CAPM, what is the portfolio's expected return?
A.9.0%
B.9.6%
C.11.0%
D.13.2%
Explanation: CAPM gives expected return = r_f + beta x (r_m - r_f) = 3% + 1.20 x (8% - 3%) = 3% + 1.20 x 5% = 3% + 6% = 9.0%. The equity risk premium of 5% is scaled by beta.
6A CIO is setting a risk budget for an actively managed multi-asset fund. In this context, 'risk budgeting' most precisely refers to:
A.Allocating the total expense ratio across asset classes
B.Deciding how much of the fund's total active risk (tracking error) is allocated to each source of active return
C.Setting the maximum permitted custody fees per manager
D.Determining the cash buffer needed to meet redemptions
Explanation: Risk budgeting allocates the fund's overall active risk (tracking error) across decisions such as asset allocation, manager selection, and security selection, directing risk where the manager has most skill and conviction. It is a deliberate, ex-ante allocation of a scarce risk resource.
7An active equity manager reports an information ratio of 0.5 with an expected active return (alpha) of 2% per annum. What annualised tracking error is implied?
A.1.0%
B.2.5%
C.4.0%
D.10.0%
Explanation: Information ratio = active return / tracking error, so tracking error = active return / IR = 2% / 0.5 = 4.0%. The information ratio measures active return earned per unit of active risk taken.
8In Brinson-style performance attribution for a balanced fund, the 'allocation effect' captures the contribution to relative return arising from:
A.Holding different securities from the benchmark within each asset class
B.The fund's management fees and transaction costs
C.Currency hedging decisions only
D.Over- or under-weighting asset classes relative to the benchmark weights
Explanation: In Brinson attribution, the allocation effect isolates the value added by weighting asset classes differently from the benchmark, holding within-class returns at benchmark levels. The selection effect captures security picking within each class, and an interaction term combines the two.
9A behavioural finance study finds that investors hold losing positions too long and sell winners too early. This pattern is best described as the:
A.Disposition effect
B.Anchoring bias
C.Money illusion
D.Survivorship bias
Explanation: The disposition effect is the tendency to realise gains quickly while holding onto losses, driven by loss aversion and a reluctance to crystallise a loss. SA7's investment psychology content highlights how such biases affect collective market behaviour and manager decisions.
10A CIO incorporates ESG considerations using a 'best-in-class' approach. This approach involves:
A.Excluding entire sectors such as tobacco and weapons from the universe
B.Selecting the companies with the strongest ESG performance within each sector rather than excluding whole sectors
C.Investing only in green bonds and renewable projects
D.Ignoring ESG ratings and relying purely on financial metrics
Explanation: Best-in-class (positive screening) selects the highest ESG-rated companies within each sector or industry, preserving diversification while tilting toward ESG leaders. It contrasts with negative screening, which excludes whole sectors, and with thematic or impact strategies.

About the IFoA SA7 Exam

IFoA SA7 Investment and Finance Specialist Advanced develops investment expertise to Chief Investment Officer level, covering strategic and tactical asset allocation, portfolio management across asset classes, derivatives and structured solutions, manager selection, risk budgeting, performance attribution, behavioural finance, ESG, and regulation.

Assessment

Online open-book written paper of long-answer and case-study questions

Time Limit

3 hours 20 minutes

Passing Score

No fixed published percentage; the pass mark is set by the IFoA Board of Examiners each sitting

Exam Fee

Per the current IFoA SA-series Fellowship exam fee schedule (Institute and Faculty of Actuaries (IFoA))

IFoA SA7 Exam Content Outline

30%

The Framework for Investment Management

Public and private asset classes, exchange-traded and OTC derivatives, structured solutions, corporate finance, market efficiency, and the analytical tools used to construct and evaluate portfolios at CIO level.

35%

Meeting Investor Requirements

Strategic and tactical asset allocation, liability-driven investment, lifecycle and benchmark design, investment governance, regulation, and ESG, matched to the objectives, horizons, and constraints of different investors.

35%

Management and Risk Control for an Investment Manager

Risk budgeting and tracking error, manager selection and governance, performance attribution, VaR and stress testing, counterparty, liquidity and operational risk, and the controls used within an investment management organisation.

How to Pass the IFoA SA7 Exam

What You Need to Know

  • Passing score: No fixed published percentage; the pass mark is set by the IFoA Board of Examiners each sitting
  • Assessment: Online open-book written paper of long-answer and case-study questions
  • Time limit: 3 hours 20 minutes
  • Exam fee: Per the current IFoA SA-series Fellowship exam fee schedule

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

IFoA SA7 Study Tips from Top Performers

1Treat SA7 as application, not recall: practise structuring CIO-level answers that weigh trade-offs in asset allocation, risk control, and governance rather than just stating facts.
2Allocate study time roughly to the syllabus weights, giving extra attention to meeting investor requirements and risk control, which each carry 35%.
3Build fluency in the quantitative tools (CAPM, Sharpe and information ratios, duration, VaR, attribution) so calculations become quick setup work under exam time pressure.
4Connect derivatives and structured solutions to real portfolio problems, such as hedging, overlays, and liability matching, rather than learning the instruments in isolation.
5Rehearse full case-based questions to time, since the 3h20m written paper rewards clear, well-organised reasoning and effective use of the open-book format.

Frequently Asked Questions

How many questions are on IFoA SA7?

SA7 is a long-answer, case-based written paper rather than a multiple-choice test, so the IFoA does not publish a fixed number of questions. Our 100 multiple-choice questions are advanced-knowledge prep that maps to the SA7 syllabus.

How long is the IFoA SA7 exam?

The SA7 paper is 3 hours 20 minutes. It is delivered online as an open-book written assessment, so time and writing discipline matter as much as technical knowledge.

What is the passing score for IFoA SA7?

The IFoA does not publish a fixed pass percentage. The pass mark for each subject is set by the Board of Examiners for each sitting after the papers are marked and standardised.

Which topics matter most on SA7?

Meeting investor requirements and management and risk control each account for 35% of the syllabus, and the framework for investment management is 30%. Asset allocation, derivatives, risk control, and ESG are heavily examined.

How does SA7 relate to SP5, SA5, and SA6?

SA7 builds on the Specialist Principles subject SP5 and earlier subjects. It replaced the former SA5 and broadened SA6 into a single Chief Investment Officer-level subject and carries around 300 credits.

Is SA7 multiple choice?

No. The real SA7 exam uses long-answer and case-study questions that require structured written analysis. These free multiple-choice questions are study tools to test and reinforce the underlying SA7 concepts.