SA6 FAQs

Discussion in 'SA6' started by Colin McKee, Oct 16, 2006.

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  1. Colin McKee

    Colin McKee ActEd Tutor Staff Member

    SA7 FAQs (updated November 2018)

    This thread contains the Subject SA7 questions asked most frequently by students, with answers written by ActEd's tutors. Each year, we'll incorporate these questions and solutions into the study material.

    This thread was last updated in November 2018.

    Question
    How does the new SA7 relate to Subjects SA5 and SA6 in the past?

    Answer
    SA7 looks to be more similar to SA6 than SA5, and many SA6 past paper questions will be relevant. Only about 10% to 20% of the material in SA5 survived into SA7, whereas about most of the material from SA6 survived intact or was rewritten. Looking at SA7 as a whole, about 10% comes from SA5, about 50% clearly comes from SA6 and the remainder is new Core Reading which was not in either of those subjects previously. Some of the new Core Reading, however, is on topics that students will be familiar with, such as Infrastructure, Structured products, LDI, investment styles, ...

    Question
    What material from other subjects will I need to know to pass SA7?

    Answer
    Assuming that the SA7 exam resembles the SA6 exams of the past, it is likely that marks will be available for knowledge outside any of the course notes (SA7, SP5 and CP1). The most common areas to be examined are typically issues that have been discussed in the financial press in the two years leading up to the exam. Topics can, however, be examined that are are covered in earlier subjects; particularly SP5 (ST5). Firstly it is worth noting that Subject ST6 (SP6) is not required for Subject SA7.

    The areas of particular importance from CB1 (CT2), CP1 (CA1), CM2 (CT8) and SP5 (ST5) include: issuing equity, capital structure and gearing, asset categories such as property, CISs, money markets and bonds, discussing economic scenarios and their impact on asset categories, risk budgeting and LDI, private equity, hedge funds, performance measurement and attribution, active and passive investment management, using derivatives for risk management, and certain regulatory issues such as Solvency II and Basel.

    Any regurgitation of Core Reading (which amounted to between 0% and 10% in recent SA6 exams) will be from the SA7 Course Notes rather than from earlier subjects.

    Question:
    What topical issues are relevant for the coming sitting (April 2019)?

    Answer
    It is impossible to say for certain, but the examiners have often focused on issues that affect investment consultants in the 24 months prior to the exam date. The examiners are not scared of picking on current issues when designing questions.
    Topics might include:

    the demands for tighter financial sector regulation, with an increase in statutory oversight.

    the large issuance of government bonds that we have seen over recent years from many western governments, and the implications for pension funds, and long-term interest rates. The spiraling pile of sovereign debt from western nations in general remains a big issue.

    The low interest rate environment that persists, and the impact on companies that may wish to increase gearing to take advantage of the cheap finance.

    BREXIT and its ramifications for asset strategies, risk budgets, and the performance of various asset categories (both short term and long term). Any question are likely to be of a generic nature ("a large country has decided to leave an international trading block ...") and the examiner would have to accept a variety of answers so long as they were coherent. Impacts on regulation, Solvency II etc would also be examinable.

    The possibility of trade tariffs and trade wars which has been discussed in the press since 2017 and the effects on the pensions and insurance world.

    The importance of credit rating an entity and the problems involved in relying on large politically-influenced rating agencies.

    Quantitative easing and its consequences. Also the arguments about competitive currency devaluation. The power of central banks in general to manipulate market prices is topical. The unwinding of QE is also topical.

    The move to central clearing of many over-the-counter derivatives and its implication for collateral, costs and liquidity.

    Question
    Which questions from earlier subjects should I use as past paper practice?

    Answer
    I intend to add a sticky thread soon that will show a list of all past paper question from SA5 and SA6, with my own personal opinion about whether they are relevant for SA7. These opinions will be my own, rather than anything official from the profession. At a high level, most SA6 recent past papers will be relevant, and many SA6 older questions will also be relevant if they are not too topical (in which case they may be dated). Only certain SA5 past questions will be relevant for SA7.
     
    Last edited: Nov 7, 2018
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