Private Markets Pathway: CFA® Level III

It is 30–35% of the 2027 Level III exam. 34 learning outcomes across 7 learning modules.

44 practice questions and 10 formula cards on this topic in the app.

Private Investments and Structures

• Distinguish private investments from listed ones by their features, and explain how the two kinds of market differ in character
• Explain the ways of investing privately and the vehicles used, and when each one suits an investor
• Explain why private-market results cannot be read like listed-market returns, and compute and interpret the paid-in multiples DPI, RVPI and TVPI and when each is useful
• Weigh the return potential and risks of private versus public market exposure within a long-term strategic allocation

General Partner and Investor Perspectives and the Investment Process

• Explain what a general partner does in running a private fund and what it owes the fund's investors
• Explain the mechanisms that tie a private manager's incentives to its investors' interests, and work out and assess the net returns limited partners keep after management fees and carried interest
• Identify what makes a company an appealing private investment target and where private owners add value
• Explain why investigating a target and drawing up a business plan are central steps when committing to a private deal
• Compare the ways a private investor can realise a holding and how each choice affects the value it achieves

Private Equity

• Explain how private equity approaches change as a company moves from start-up to maturity and decline
• Explain the distinguishing traits of venture deals and of growth equity deals
• Set out the defining features of buyouts as a private equity strategy
• Derive the main valuation inputs and value a private equity stake in venture, growth-equity and buyout deals, interpreting what the figures imply
• Weigh risk and return across private equity strategies, and against other asset classes, when setting a strategic allocation

Private Debt

• Explain how private market strategies draw on borrowed money at each stage of an investment's life
• Explain how private market deals are funded with high-yield bonds, leveraged loans and convertible debt, and why each is chosen
• Distinguish mezzanine financing from unitranche lending and the circumstances in which a sponsor would pick each
• Assess a private borrower's credit profile and compute and interpret the ratios lenders rely on to price and value the debt
• Weigh risk and return across private credit strategies, and set them against other private market assets, in a strategic allocation

Private Special Situations

• Explain the features of special situations investing and the risks it brings
• Explain what defines distressed debt, the funding routes open to a troubled issuer, and the approaches investors take in distressed deals
• Explain the traits of complex opportunities that emerge from market dislocation or financial strain
• Explain how special situations are investigated and valued before capital is committed
• Contrast the risk-return profiles of different special situations strategies, and of special situations versus other private debt, in a strategic allocation

Private Real Estate Investments

• Explain the key characteristics of investing in private real estate
• Explain which economic forces drive private property values and what the asset class contributes to a portfolio
• Explain how private property investments are vetted and valued
• Explain what sets timberland and farmland apart from other real asset investments
• Weigh risk and return across private property strategies and against other assets in a strategic allocation

Infrastructure

• Explain the key characteristics of infrastructure as an investment
• Explain the routes and vehicles for gaining infrastructure exposure and what each one is suited to
• Explain how an infrastructure project is financed and managed from development through operation, and what debt and equity each contribute
• Explain how infrastructure assets are investigated and valued
• Weigh risk and return across infrastructure strategies and relative to other assets within a strategic allocation