Pathway Private Markets Overview

CFA Level 3 — Private Markets Pathway Overview Exam: CFA Level 3 — Private Markets Pathway Last Updated: June 2026 --- ## What Is the Private Markets Pathway? The Private Markets pathway focuses on investing in assets that are not publicly traded — private equity, private credit, real assets, and co-investments. This pathway is appropriate for candidates working at private equity firms, venture capital funds, private credit managers, institutional allocators, sovereign wealth funds, and family offices with significant illiquid allocations. Private markets differ fundamentally from public markets in liquidity, pricing frequency, return measurement, and due diligence requirements. The pathway curriculum reflects these differences directly. --- ## Exam Format | Format Element | Detail | |---|---| | Total exam time | Approximately 4.5 hours (two sessions) | | Morning session | Constructed response (essay) — private markets topics concentrated here | | Afternoon session | Item set (vignette) questions — blend of pathway-specific and common topics | | Essay command words | Calculate, evaluate, recommend, compare, justify, discuss | | Item set format | 4–6 questions per vignette; multiple choice | > Exam Tip: Private markets essays often require candidates to evaluate a fund's performance or structure using TVPI, DPI, RVPI, and IRR simultaneously. Practice interpreting what each metric implies when they diverge. --- ## Core Topic Areas ### 1. Private Equity — Leveraged Buyouts (LBO) LBO is the dominant private equity transaction structure. LBO mechanics: - PE firm acquires a company using a combination of equity (typically 30–40%) and debt (60–70%) - Debt is placed on the acquired company's balance sheet - Returns are driven by: (1) multiple expansion, (2) earnings growth (EBITDA), (3) leverage/debt paydown LBO return decomposition:…