CFA Institute
Encyclopedia
CFA Institute is headquartered in the United States of America at Charlottesville, Virginia
, with offices in Hong Kong
and London
. Formerly known as the Association for Investment Management and Research (AIMR), CFA Institute awards the Chartered Financial Analyst
(CFA) designation. In addition to administering the CFA Exam, CFA Institute publishes the Financial Analysts Journal, founded in 1945. CFA Institute also operates the CFA Institute Centre for Financial Market Integrity and the Research Foundation of CFA Institute.
. Similar organizations were formed elsewhere starting with the New York
Society of Security Analysts (NYSSA) in 1937. In 1947, the organizations merged to create an umbrella organization, the National Federation of Financial Analysts Societies (NFFAS). As societies were formed, they too joined the national organization.
In 1959, the member societies voted to form the Institute of Chartered Financial Analysts for the purpose of providing the CFA certification. ICFA offered the first CFA Exam in 1963 and adopted a three-exam format in 1964. The NFFAS, which later became the Financial Analyst Federation (FAF), remained as an umbrella organization for the member societies.
After many years of operating separately, the two organizations voted in 1990 to move toward a merger as the Association for Investment Management and Research (AIMR). The organizations merged in 1999. In 2004, AIMR voted to change its name to CFA Institute to reinforce its association with the CFA charter that it issues. One hundred thirty member societies have also changed their names to reflect the global society's name change.
Today, CFA Institute claims over 100,000 members. There are 136 societies in 57 countries. More than half of the membership is in the United States
and Canada
. Approximately 88% of total membership holds the CFA designation.
A key concept of GIPS is that performance should be presented for composites that must include all fee-paying, discretionary accounts managed by a firm or money manager for a given investment strategy
or objective. This avoids selection bias
: including only accounts with good returns.
GIPS standards represent ethical principles that establish a practitioner-driven, industry-wide approach to follow in calculating and reporting historical investment results for presentation to clients and prospective clients. The GIPS standards arose from the absence of meaningful comparison among reported investment results, even by ethical firms. Several performance measurement practices made comparability difficult, while other practices cast doubt on the credibility of performance reporting in the industry:
Another key concept of the Standards is regarding "verification." This is often a confusing topic, because it doesn't actually "verify" a firm's claim of compliance; rather, it involves having an independent third party review the firm's processes and procedures, as well as their composite construction.
Virginia
The Commonwealth of Virginia , is a U.S. state on the Atlantic Coast of the Southern United States. Virginia is nicknamed the "Old Dominion" and sometimes the "Mother of Presidents" after the eight U.S. presidents born there...
, with offices in Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
and London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
. Formerly known as the Association for Investment Management and Research (AIMR), CFA Institute awards the Chartered Financial Analyst
Chartered Financial Analyst
The Chartered Financial Analyst Program is a graduate level self-study program offered by the CFA Institute to investment and financial professionals...
(CFA) designation. In addition to administering the CFA Exam, CFA Institute publishes the Financial Analysts Journal, founded in 1945. CFA Institute also operates the CFA Institute Centre for Financial Market Integrity and the Research Foundation of CFA Institute.
History
In 1925, an organization of investment analysts founded the Investment Analyst Society of ChicagoChicago
Chicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
. Similar organizations were formed elsewhere starting with the New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
Society of Security Analysts (NYSSA) in 1937. In 1947, the organizations merged to create an umbrella organization, the National Federation of Financial Analysts Societies (NFFAS). As societies were formed, they too joined the national organization.
In 1959, the member societies voted to form the Institute of Chartered Financial Analysts for the purpose of providing the CFA certification. ICFA offered the first CFA Exam in 1963 and adopted a three-exam format in 1964. The NFFAS, which later became the Financial Analyst Federation (FAF), remained as an umbrella organization for the member societies.
After many years of operating separately, the two organizations voted in 1990 to move toward a merger as the Association for Investment Management and Research (AIMR). The organizations merged in 1999. In 2004, AIMR voted to change its name to CFA Institute to reinforce its association with the CFA charter that it issues. One hundred thirty member societies have also changed their names to reflect the global society's name change.
Today, CFA Institute claims over 100,000 members. There are 136 societies in 57 countries. More than half of the membership is in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
. Approximately 88% of total membership holds the CFA designation.
Quick Facts
The largest of CFA Institute's member societies are:- New York Society of Security Analysts - 10,945 members
- CFA Society of the UK - 6,928 members
- TorontoTorontoToronto is the provincial capital of Ontario and the largest city in Canada. It is located in Southern Ontario on the northwestern shore of Lake Ontario. A relatively modern city, Toronto's history dates back to the late-18th century, when its land was first purchased by the British monarchy from...
CFA Society - 6,289 members - The Hong KongHong KongHong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
Society of Financial Analysts Limited - 4,399 members - The BostonBostonBoston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
Security Analysts Society - 4,526 members - CFA Society of ChicagoChicagoChicago is the largest city in the US state of Illinois. With nearly 2.7 million residents, it is the most populous city in the Midwestern United States and the third most populous in the US, after New York City and Los Angeles...
- 3,377 members - CFA Society of San Francisco - 2,767 members
- FloridaFloridaFlorida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
has the largest number of societies (six) followed by CaliforniaCaliforniaCalifornia is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
and OhioOhioOhio is a Midwestern state in the United States. The 34th largest state by area in the U.S.,it is the 7th‑most populous with over 11.5 million residents, containing several major American cities and seven metropolitan areas with populations of 500,000 or more.The state's capital is Columbus...
(five each). - The oldest society is in Chicago - founded 1925.
- The youngest societies are in EgyptEgyptEgypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...
and BahrainBahrain' , officially the Kingdom of Bahrain , is a small island state near the western shores of the Persian Gulf. It is ruled by the Al Khalifa royal family. The population in 2010 stood at 1,214,705, including 235,108 non-nationals. Formerly an emirate, Bahrain was declared a kingdom in 2002.Bahrain is...
- both admitted in May 2006.
GIPS
GIPS (Global Investment Performance Standards) is set of standards for the presentation of investment performance information, established by CFA Institute in 1999 with the aim of creating ethical, global and industry-wide methods of communicating investment results to clients and prospective clients.A key concept of GIPS is that performance should be presented for composites that must include all fee-paying, discretionary accounts managed by a firm or money manager for a given investment strategy
Investment strategy
In finance, an investment strategy is a set of rules, behaviors or procedures, designed to guide an investor's selection of an investment portfolio...
or objective. This avoids selection bias
Selection bias
Selection bias is a statistical bias in which there is an error in choosing the individuals or groups to take part in a scientific study. It is sometimes referred to as the selection effect. The term "selection bias" most often refers to the distortion of a statistical analysis, resulting from the...
: including only accounts with good returns.
GIPS standards represent ethical principles that establish a practitioner-driven, industry-wide approach to follow in calculating and reporting historical investment results for presentation to clients and prospective clients. The GIPS standards arose from the absence of meaningful comparison among reported investment results, even by ethical firms. Several performance measurement practices made comparability difficult, while other practices cast doubt on the credibility of performance reporting in the industry:
- Account Selection
- Survivorship Bias
- Varying measurement periods
Another key concept of the Standards is regarding "verification." This is often a confusing topic, because it doesn't actually "verify" a firm's claim of compliance; rather, it involves having an independent third party review the firm's processes and procedures, as well as their composite construction.
External links
- CFA Institute
- CFA passport to money markets, Edmonton Journal
- CFA Institute has new designation for due diligence, Investment News
- CFA, A Demanding Designation, Edmonton Journal
- While Ivy League MBAs Impress, Hottest Three Letters Are CFA, New York Sun
- CFA Test-Takers Seek Wall Street Success, Global Acceptance, Bloomberg News
- Rise of the Grueling Professional Exam, Financial Times