By David Snow, Editor in Chief 

Accountants have the CPA, investment analysts have the CFA and now alternative investment professionals have the CAIA. Haven't heard of it? There's a reason - it's brand new. The Chartered Alternative Investment Analyst Association, which just launched a promotional push for this new program, hopes to someday see thousands of industry professionals stamping "CAIA" on business cards and resumes.

Answer this question: "The potential portfolio benefit of the ________ strategy is to exploit the opportunities that are offered by securities that are too risky for traditional lenders and have too little upside potential for traditional equity investors. A) long only B) mezzanine capital C) short selling D) Regulation D E) None of the above."

If you guessed "B," you're part of the way toward passing the second and final level of the CAIA certification program, which covers hedge funds, private equity, real estate, commodities and managed futures, as well as portfolio theory, indexing and securitization, among other topics.

The program is the brainchild of Thomas Schneeweis, the influential head of the Center for International Securities and Derivatives Markets (CISDM) at the University of Massachusetts, Amherst, and Florence Lombard, the head of the London-based Alternative Investment Management Association. The two created the CAIA Association as a nonprofit sponsor for what they hope will become "recognized worldwide as the industry's premier symbol of excellence," according to the group's marketing material.

A person with a CAIA designation needs to pass Level I and Level II exams. The CAIA also sponsors continuing education programs on alternative investments. Craig Asche, the newly anointed executive director of the association, said Schneeweis and Lombard formed the association in 2002 after noting with dismay that, unlike many other professions related to finance, the alternative investment industry had no professional standards. 

"There are people out there with no background [in alternatives], who are consultants and analysts," Asche says. "Many of them primarily have a background in traditional investments but are now advising people in alternatives."

The industry has gotten along just fine without a professional designation thus far, albeit in an environment that more resembles the Wild West than a standardized, institutionally driven market. Asche warns that "there is a risk if the industry doesn't address the fact that there is no standard out there to be measured against," - a deficiency that the SEC noted in its recent report on hedge funds.

The CAIA curriculum was put together by an impressive list of academics and industry veterans, including University of Reading's Harry Kat on the hedge fund side, and Harvard Business School's Josh Lerner on the private equity side. Level I presents a "foundation of basic tools one needs to begin to understand and analyze these markets," says Asche. Topics include quantitative analysis, "traditional instruments" such as equity and fixed-income securities, valuation and investment theory, ethics, and finally, an introduction to the major strategies that make up the "alternatives" industry - hedge funds, commodities and managed futures, real estate and private equity.

The association will now begin a major effort to touch base with financial institutions and regulatory organizations in an effort to get its professional designation more broadly recognized. Early reception has been good, Asche says, but there is a small hurdle - the name. The acronym "CAIA" doesn't exactly roll off the tongue. No matter - there are worse acronyms that have become well-known. Some Europeans have taken to bypassing the letter-by-letter read-out and say, simply, "KAI-yah."

Once we hear "KAI-yah" pepper the speech of business school students, we'll know the alternative investment industry has gone mainstream.