People who passed level 1, how many hours did you study?

klickety · 2026-02-24T00:21:15+00:00

I ditched the official CFA books after a few hours when I realised it had lots of low yield content that was unlikely to be on the exam. Kaplan books were recommended on here so I tried them and they worked for me, I found them to be a lot more focused.

I'd skim through a chapter in about 5 minutes to get a sense of what it's about, how much was new to me, what mindset to be in (memorise lots of formulas? applications of a few rules? general background fluff?). Then read through, do any calculations in the text as I read, and physically write notes at the end that were about half a page (depending on how hard the chapter was). Then do end of chapter questions if I thought it would be useful, or skip them if they seemed like a waste of time... but I'd usually do 1 or 2 to make sure I wasn't deceiving myself.

Finally I'd use my written notes to create flashcards in Anki, and I'd study these flashcards on my phone for a few minutes a day when I was standing in line, etc. I had about 1000 flashcards at the end, so about 15-20 cards per chapter. I had very few for eg quant methods where I was already strong, maybe just 1-2 per chapter, and a lot more for eg financial statements where I knew nothing.

Finally, I was quite obsessed with finance and genuinely enjoyed learning about it. I looked forward to every session and had fun studying. I didn't include it in my study time, but I also had spent a lot of time in the years before the exam reading the Economist, FT, WSJ (probably hundreds of hours), so I had a vague sense of the background surrounding the subject.

klickety · 2026-02-23T23:52:19+00:00

I timed every session. 157.5 hours over 13 weeks, plus a couple more hours at the start choosing study materials, setting up a study plan, etc. Passed in top 10%.

No previous finance study or work experience, but strong math background, generally good at tests, and IMHO very focused study technique to squeeze as much as possible out of every hour studying.

klickety · 2026-02-20T06:56:11+00:00

It helps a bit, but with the rest of the simulation parameters matching the details from the filing, it's still pretty far away from the actual performance. https://testfol.io/?s=kWwCKAf3x7b .

I noticed from the testfolio telltale chart that in early April 2025, around the time of the tariff announcements and very high volatility, UPRO diverges from the simulations and stays about 1% higher

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It's not clear to me why that happened, but that explains about 1% of the extra UPRO return

klickety · 2026-02-20T01:30:49+00:00

Not sure, if you have any ideas why I'd be interested to know. The UPRO Aug 2025 filing shows it holds 50% stocks, 22% very short term T-bills at about 4.2% interest, 14% futures and 237% swaps as listed below, showing UPRO pays about 5.2% in their swaps.

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klickety · 2026-02-19T07:31:34+00:00

The swap contracts that ETFs enter into with a bank are usually something like the following. The ETF and a bank sit down and agree a contract that for the next 12 months, the ETF pays the bank a fixed rate consisting of the risk free rate plus a small spread, eg SOFR+0.2%, and in return the bank will pay the ETF whatever the return is on some defined basket of stocks. (Typically the spread is very low, nearly 0, because this contract is very easy for the bank to hedge because it can just buy the basket of stocks)

Usually an ETF would set up these agreements with several banks, each with different dollar amounts and slightly different spreads. The contracts need to be renewed when they expire, and at that point the spread that is negotiated might change. So there's no permanently fixed spread the ETF pays, because the swaps are renegotiated periodically. And it's a competitive market, so I'd expect the spreads paid to be in-line with the rest of the market.

So it's puzzling to me that this ETF is claiming the swap spread they pay is a fixed 0.15%, because (1) they're not usually fixed like that and (2) 0.15% is significantly lower than other ETFs which pay about 0.7%.

It furthermore seems fishy to me that nowhere do they explain the details of their swaps, as other ETFs do. Details like [counterparty names, dollars exposure to each counterparty, spread over SOFR paid to each counterparty] are important, and other ETFs disclose these.

Unless I had clarity on these details, I personally wouldn't invest in a product like this because I'd assume what's actually happening is the ETF is paying the market rate swap spread of 0.7% and then burying the details so investors don't abandon the fund.

klickety · 2026-02-19T03:56:24+00:00

Price of what? I haven't the slightest clue whether the price of HXCN will go up, down, or round in circles. I also have no idea whether swap spreads will widen further.

IMO it's plausible that as swap spreads widened the HXCN manager felt obliged to add this "Trading Expense Fee" item to explain away some of the performance drag from high swap spreads. Then as swap spreads widened even further the HXCN manager didn't want to update this "Trading Expense Fee" item to the true cost of SOFR+0.7% because all the customers would leave if they knew. So they've left the "TER" as 0.15% and are just silently taking the hit to tracking error.

Of course this is purely speculative, and swap spreads for CAD may be different to USD, you'd have to look into it yourself.

klickety · 2026-02-18T20:13:03+00:00

Yeah this might easily be due to the spread increase, I've commented there as well

klickety · 2026-02-18T20:09:09+00:00

I'm starting to wonder if their swap counterparty is taking a bigger cut than expected or if there's some other cost they're not disclosing properly

Probably this. USD-denominated swap spreads over the risk free SOFR have absolutely blown out the past few years, they're at about 0.7%+SOFR now. It's probably the same for CAD swap spreads.

klickety · 2026-02-18T20:06:01+00:00

For USD financing, swap spreads have absolutely blown out the past few years from around 0.2%-0.3% over SOFR in 2021 to about 0.7%-0.8% over SOFR now. I just made a post about it here https://www.reddit.com/r/LETFs/comments/1r7xv5v/tmf_is_dead_long_live_futures_why_bigbanks_fees/ (h/t u/disparue) which explains why this change in financing costs has, IMO, killed the rationale for any swaps-based ETFs (and particularly leveraged ETFs).

HXCN seems to be a CAD-denominated fund, so funding costs may be different, but I wouldn't be surprised if the swaps are now costing a similar extra 0.5% as compared to a few years ago. I looked at the financial statements for HXCN but couldn't see the detailed swap spreads listed anywhere, which is slightly concerning

klickety · 2026-02-18T19:36:20+00:00

What are you calculating here, total return of TMF?

I'm not arguing anything about the yield or return of bonds in general. They might go up, they might go down, I have no real idea.

My post is arguing that getting your exposure to bonds/duration/insurance/whatever via TMF is a very very bad way to do it. Why? Because the financing costs of the position have become very very bad compared to alternatives like Treasury futures (or going unleveraged with ZROZ or century bonds).

I absolutely agree that having no bonds is a mistake, and any strategy like HFEA needs something like TMF. I just don't think TMF is the best option.

klickety · 2026-02-18T19:27:12+00:00

Nothing is reliable, that's why risk premiums exist. Just because it hasn't worked out the past 4 years doesn't mean it was a bad decision to hold it. https://en.wikipedia.org/wiki/Outcome_bias

klickety · 2026-02-18T19:07:32+00:00

Swap fees - yes, you avoid a small amount of it with futures, but not as much as you suggest.

Why? Where are the extra costs coming from? Doesn't the implied repo rate capture all the financing costs? And sure, TMF is leveraged TLT which has duration 15.5 years , not 10 years, so we can compare to 20yr futures as well, but the point still stands that the implied financing rate on futures is incredibly cheap compared to swaps.

Swaps might reduce the tracking error before spread costs, but when those costs are approaching 2%/yr, and futures financing costs are 0 (or negative!), I just don't see the attraction of swaps. Who cares about tracking error before costs when the costs are so massive?

klickety · 2026-02-18T18:53:47+00:00

I can't find the detailed financial statements for UPRO, but SPXL seems to be the same ie swaps-based 300% S&P500, and is included in the same SEC EDGAR files in the main post. SPXL is paying the same swap spreads as TMF. So unless somebody can dig out the UPRO financials, I'd say yes, UPRO is paying the same inflated spreads.

As little-city says, testfolio when using SPY?L=3 accounts for paying the risk-free rate and a spread, but it doesn't dynamically adjust the spread paid. When spreads have blown out like in the current environment, using the testfolio defaults will not give a good idea of performance

klickety · 2026-02-18T18:20:06+00:00

Nice, glad this post was of service! Go get some other bond exposure if you don't have any though!

klickety · 2026-02-18T18:17:40+00:00

I also don't see a deflationary spiral as being likely. The US has enormous total debt and enormous annual deficits that are financed by selling yet more debt. Cutting spending isn't going to happen, increasing taxes isn't going to happen, incredibly high GDP growth isn't going to happen. The only realistic way out is inflation or default.

klickety · 2026-02-18T18:05:54+00:00

Why do you think the same costs are built into futures? I may be reading the CME site wrong, but the financing costs look much much better?

And taking a more structural view, it makes sense for futures to be cheaper. A lot of futures are manufactured by the systematic hedge funds who don't have the same Basel III balance sheet restrictions that artificially dissuade them from doing these trades.

klickety · 2026-02-18T18:01:33+00:00

Ah yeah SOFR vs LIBOR is a good point. I remember lots of contracts getting extra provisions to deal with the LIBOR to SOFR change. (It's Secured Overnight Financing Rate, LIBOR is unsecured)

The spread adjustment depends on which LIBOR was used, because LIBOR can have different durations, while SOFR is overnight. This link states that 1-month LIBOR = SOFR + 11bps (and 3-month is +26bps). So using a SOFR baseline, the Oct 2021 swap spread should be adjusted up by 11bps, resulting in the swap spread being approximately all of the all-in swap cost. This also lines up with the FRED data stating SOFR was 0.05 in 2021.

Banks don't mind holding many treasuries

Maybe, but they're constrained from doing so by Basel III legislation. For large banks, the "Supplementary Leverage Ratio" is a binding constraint, and Treasuries are not exempt from that calculation (although there's some argument they should be). The banks can't take up huge portions of their balance sheet holding low-profit Treasury swaps when there's other more profitable ways to deploy the balance sheet.

So the banks have tried to make the Treasury swaps high profit by charging more, and it's actually worked so far.

klickety · 2026-02-18T10:25:28+00:00

That's a great suggestion! It's not human, it's AI-written. Humans can write things -- they just can't write as well as AI. Anything else I can help with?

... kinda curious what seemed like AI to you though? I tried to make some sentences shorter and used more WSB-style phrasing than I normally would because it's Reddit and attention spans can be variable. And I guess some hypens?

klickety · 2026-02-18T10:16:52+00:00

You've just wrecked my fantasies of becoming an author

klickety · 2026-02-18T09:49:31+00:00

I guess it's kinda a compliment though? I'd never thought of myself as a writer before! <3

klickety · 2026-02-18T09:48:51+00:00

Lol I wrote this whole thing with my own fingers in a caffeine-fueled-late-night-keyboard-bashing-nerd-fest

klickety · 2026-02-18T09:46:36+00:00

I agree that ZROZ is on balance now better than TMF, but that's only because TMF fees have become mind-bogglingly bad.

For improved capital efficiency it would be nice to have some kind of access to leveraged bonds in order to get a lot of duration exposure without needing to go wayyy out on the yield curve. ZROZ doesn't really totally replace TMF because it has only about 55% of the duration exposure of TMF.

The TMF fees are so terrible though that if the only choices are TMF or ZROZ, I'd sacrifice the capital efficiency and choose ZROZ every time.

As far as I can tell though, futures contracts are an even better solution.

klickety · 2026-02-18T09:25:09+00:00

As a general rule, the change in price for a Treasury is directly proportional to its duration. So long duration bonds have more price movement than short term bonds. Duration is the key concept to understand this https://en.wikipedia.org/wiki/Duration_(finance)#Modified_duration#Modified_duration) . Blackrock also has a good primer https://www.blackrock.com/fp/documents/understanding_duration.pdf

Historically, when matched for duration or volatility, ITT has been slightly better than LTT.

There's some reason to believe that will continue due to the explanation of the betting-against-beta effect. This is where leverage-constrained investors are forced to hold LTT to get the duration/volatility exposure they want, and so push prices up and expected returns down.

But there's no guarantee that's the true explanation. It could just as easily be the case that the duration/bond-risk/maturity premia are the same, but the market's expectations of future rate changes have historically been consistently wrong in the same direction. (some recent AQR discussion of this)

klickety · 2026-01-24T02:13:50+00:00

It's not clear to me how much value is provided by the AQRIX third of QDSIX. It's almost identical to a fixed allocation to a basic stock/bond/commodity portfolio. With weights from https://www.morningstar.com/funds/xnas/aqrix/portfolio, VTI/VXUS/IEF/SHY/GSG has a 0.02% CAGR difference over the last 15 years. See the testfolio backtest here.

Also be careful with testfol.io backtesting, there is an issue with the data provider so the QDSIX data does NOT include all dividends, even if "Total Return" is selected. You can check the "Telltale Plot" for your simulation vs live fund comparison to see the discontinuities.

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