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2026 Statistics
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 Practice Questions
Verified exam format metadata for IFoA SA7 Investment and Finance Specialist Advanced is pending. The practice questions above remain available while official exam length, timing, passing score, fee, and administrator details are reviewed.