Actuarial Notes

Exam INV-101

INV 101 – Portfolio Management is an exam of the Society of Actuaries' Fellowship (FSA) pathway. Its syllabus covers the Nov 2026/Mar 2027/Jul 2027 sittings.

Learning Objectives

Asset Classes (25–40%) The candidate will understand the nature and the variety of asset classes that can be used in constructing a portfolio.

  1. Demonstrate an understanding of cash flow characteristics, underlying risks and roles in investment portfolios of various fixed income investments, including:
  2. Demonstrate an understanding of the distinguishing investment characteristics and potential contributions to investment portfolios of various types of equity and alternative investments, including:

Readings:

  • Handbook of Fixed Income Securities, Fabozzi, F.J., 9th Edition, 2021 (1a)
    • Ch. 1: Overview of the Types and Features of Fixed Income Securities (background only)
    • Ch. 2: Risks Associated with Investing in Fixed Income Securities (background only)
    • Ch. 7: U.S. Treasury Securities (background only)
    • Ch. 10: Corporate Bonds
    • Ch. 11: Leveraged Loans
    • Ch. 21: An Overview of Mortgages and the Mortgage Market
    • Ch. 22: Agency Mortgage Passthrough (pp. 471-491 before Anatomy of the Agency Passthrough Market section)
    • Ch. 23: Agency Collateralized Mortgage Obligations (pp. 499-520 before Exotics section)
    • Ch. 60: Financing Positions in the Bond Market
  • Commercial Real Estate Analysis and Investments, Geltner, David, and Miller, Norman, et al, 4th Edition, 2026 (1a)
    • Section VI Introduction (background only)
    • Ch. 19: Mortgage Basics I: An Introduction and Overview
  • INV101-102-25: High-Yield Bond Primer (1a)
  • INV101-101-25: Overview of Investing in Private Corporate Debt - Fabozzi in JPM (1a)
  • The Handbook of Traditional and Alternative Investment Vehicles, Anson, M. J. P., Fabozzi, F. J., & Jones, F. J., 2011 (1a)
    • Ch. 10: Structured Credit Products
  • INV101-106-26: Collateralized Loan Obligations: A Primer (1a)
  • Portfolio Management in Practice Volume 1: Investment Management, CFA Institute, 2021 (1b)
    • Ch. 11: Overview of Equity Portfolio Management (sections 1-2 only)
  • The Handbook of Traditional and Alternative Investment Vehicles, Anson, M. J. P., Fabozzi, F. J., & Jones, F. J., 2011 (1b)
    • Ch. 18: Investing in Capital Venture Funds
    • Ch. 19: Investing in Leveraged Buyouts
  • Commercial Real Estate Analysis and Investments, Geltner, David, and Miller, Norman, et al, 4th Edition, 2026 (1b)
    • Ch. 13: After-Tax Real Estate Investment Analysis
    • Ch. 14: Advanced Topics I: Investment Value in Property Investment and Debt Financing
    • Ch. 26: Real Estate Investment Trusts (REISTS) (section 26.2 only)
  • INV101-100-25: Chapters 3 and 4 of Alternative Investments: A Primer for Investment Professionals, CFA Institute (1b)

Portfolio Construction, Management, and Assessment (35–50%) The candidate will understand portfolio construction, management, and assessment.

  1. Describe the portfolio management process and recommend investment governance structure
  2. Develop an investment policy statement (IPS) for an institutional investor
  3. Demonstrate an understanding of portfolio construction approaches and techniques for asset allocation, passive/active management and rebalancing
  4. Recommend and justify an optimal portfolio allocation in a risk-return framework
  5. Demonstrate an understanding of common techniques to enhance yield and manage liquidity in fixed income portfolios
  6. Construct and manage portfolios of fixed income investments under various strategies, including indexing and target return
  7. Construct and manage portfolios of equity under various passive strategies
  8. Construct and manage portfolios of equity under various active strategies
  9. Apply performance measurement methodologies to various asset portfolios
  10. Describe and assess techniques to select or build an asset benchmark for a given investment objective
  11. Assess and interpret performance attribution metrics for a given asset or portfolio
  12. Understand how behavior bias can impact portfolio management

Readings:

  • Portfolio Management in Practice Volume 1: Investment Management, CFA Institute, 2021 (2a, 2c)
    • Ch. 5: Overview of Asset Allocation (sections 2-8, excl. subsection 6.3)
  • INV101-103-25: Elements of an Investment Policy Statement for Institutional Investors, CFA Institute (2b)
  • Portfolio Management in Practice Volume 1: Investment Management, CFA Institute, 2021
    • Ch. 6: Principles of Asset Allocation (sections 2-3 & 5-7) (2d)
    • Ch. 9: Overview of Fixed-Income Portfolio Management (2e)
    • Ch. 10: Liability-Driven and Index-Based Strategies (sections 7-9) (2f)
    • Ch. 11: Overview of Equity Portfolio Management (background only) (2g)
    • Ch. 12: Passive Equity Investing (2g)
  • INV101-104-25: The Hidden Dangers of Passive Investing (2g)
  • Portfolio Management in Practice Volume 1: Investment Management, CFA Institute, 2021
    • Ch. 13: Active Equity Investing: Strategies (2h)
    • Ch. 19: Portfolio Performance Evaluation (2i, 2j, 2k)
  • INV101-105-25: Addressing Built-in Biases in Real Estate Investment (including Appendix) (2l)
  • Portfolio Management in Practice Volume 1: Investment Management, CFA Institute, 2021 (2l)
    • Ch. 7: Asset Allocation with Real-World Constraints (section 6 only)

Credit Risk Management (20–35%) The candidate will understand the best practices of credit risk management.

  1. Demonstrate an understanding of credit risk analysis including at the portfolio level
  2. Demonstrate an understanding of and the ability to apply both the concepts and techniques used in the measurement of default risk of individual securities
  3. Understand, evaluate, and apply credit risk modeling techniques.

Readings:

  • The Handbook of Credit Risk Management, Bouteille, Sylvain, and Coogan-Pushner, Diane, 2nd Edition, 2022 (3a, 3b)
    • Ch. 1: Fundamentals of Credit Risk (background only)
    • Ch. 4: Measurement of Credit Risk
    • Ch. 6: Fundamental Credit Analysis
    • Ch. 7: Alternative Estimations of Credit Quality
    • Ch. 13: Credit Portfolio Management
  • INV101-107-26: Chapter 12 of Quantitative Enterprise Risk Management, Hardy, Mary and Saunders, David, 2022 (3c)
  • INV101-108-26: Chapters 3 and 5 of Credit Risk, Darrell Duffie and Kenneth J. Singleton, 2003 (3c)

Source Material

Source Material

  • Handbook of Fixed Income Securities, Fabozzi, F.J., 9th Edition, 2021
    • Ch. 1: Overview of the Types and Features of Fixed Income Securities (background only) (1a)
    • Ch. 2: Risks Associated with Investing in Fixed Income Securities (background only) (1a)
    • Ch. 7: U.S. Treasury Securities (background only) (1a)
    • Ch. 10: Corporate Bonds (1a)
    • Ch. 11: Leveraged Loans (1a)
    • Ch. 21: An Overview of Mortgages and the Mortgage Market (1a)
    • Ch. 22: Agency Mortgage Passthrough (pp. 471-491 before Anatomy of the Agency Passthrough Market section) (1a)
    • Ch. 23: Agency Collateralized Mortgage Obligations (pp. 499-520 before Exotics section) (1a)
    • Ch. 60: Financing Positions in the Bond Market (1a)
  • Commercial Real Estate Analysis and Investments, Geltner, David, and Miller, Norman, et al, 4th Edition, 2026
    • Section VI Introduction (background only) (1a)
    • Ch. 19: Mortgage Basics I: An Introduction and Overview (1a)
    • Ch. 13: After-Tax Real Estate Investment Analysis (1b)
    • Ch. 14: Advanced Topics I: Investment Value in Property Investment and Debt Financing (1b)
    • Ch. 26: Real Estate Investment Trusts (REISTS) (section 26.2 only) (1b)
  • INV101-102-25: High-Yield Bond Primer
    • Outcomes 1a
  • INV101-101-25: Overview of Investing in Private Corporate Debt - Fabozzi in JPM
    • Outcomes 1a
  • The Handbook of Traditional and Alternative Investment Vehicles, Anson, M. J. P., Fabozzi, F. J., & Jones, F. J., 2011
    • Ch. 10: Structured Credit Products (1a)
    • Ch. 18: Investing in Capital Venture Funds (1b)
    • Ch. 19: Investing in Leveraged Buyouts (1b)
  • INV101-106-26: Collateralized Loan Obligations: A Primer
    • Outcomes 1a
  • Portfolio Management in Practice Volume 1: Investment Management, CFA Institute, 2021
    • Ch. 11: Overview of Equity Portfolio Management (sections 1-2 only) (1b)
    • Ch. 5: Overview of Asset Allocation (sections 2-8, excl. subsection 6.3) (2a, 2c)
    • Ch. 6: Principles of Asset Allocation (sections 2-3 & 5-7) (2d)
    • Ch. 9: Overview of Fixed-Income Portfolio Management (2e)
    • Ch. 10: Liability-Driven and Index-Based Strategies (sections 7-9) (2f)
    • Ch. 11: Overview of Equity Portfolio Management (background only) (2g)
    • Ch. 12: Passive Equity Investing (2g)
    • Ch. 13: Active Equity Investing: Strategies (2h)
    • Ch. 19: Portfolio Performance Evaluation (2i, 2j, 2k)
    • Ch. 7: Asset Allocation with Real-World Constraints (section 6 only) (2l)
  • INV101-100-25: Chapters 3 and 4 of Alternative Investments: A Primer for Investment Professionals, CFA Institute
    • Outcomes 1b
  • INV101-103-25: Elements of an Investment Policy Statement for Institutional Investors, CFA Institute
    • Outcomes 2b
  • INV101-104-25: The Hidden Dangers of Passive Investing
    • Outcomes 2g
  • INV101-105-25: Addressing Built-in Biases in Real Estate Investment (including Appendix)
    • Outcomes 2l
  • The Handbook of Credit Risk Management, Bouteille, Sylvain, and Coogan-Pushner, Diane, 2nd Edition, 2022
    • Ch. 1: Fundamentals of Credit Risk (background only) (3a, 3b)
    • Ch. 4: Measurement of Credit Risk (3a, 3b)
    • Ch. 6: Fundamental Credit Analysis (3a, 3b)
    • Ch. 7: Alternative Estimations of Credit Quality (3a, 3b)
    • Ch. 13: Credit Portfolio Management (3a, 3b)
  • INV101-107-26: Chapter 12 of Quantitative Enterprise Risk Management, Hardy, Mary and Saunders, David, 2022
    • Outcomes 3c
  • INV101-108-26: Chapters 3 and 5 of Credit Risk, Darrell Duffie and Kenneth J. Singleton, 2003
    • Outcomes 3c