The CII AF4 September 2025 Exam in Review

It’s now time for us to turn our attention to the September CII AF4 exam. The following will be useful reading for those preparing to sit AF4 in the near future.  

This article is correct as at 30 December 2025.

You can find the exam guide here.*  

Section A 

Question 1

The first question is the biggest question with 80 marks available in total.  The case study introduced us to Vasileois who was aged 65 and the majority shareholder in a business.  We were given details of his salary, his annual dividends, and the fact he may be selling the company for an offer of £1.4m.   We were also given details of two investment trusts and an OEIC fund.

The first question, however, was a general theory question; candidates had to describe the key principles and assumptions of Modern Portfolio Theory. This was for 10 marks and, as this has been tested fairly recently, should have been a good start for the well-prepared candidate.

Part (b) was in four parts, each giving relatively small marks in themselves but a total of 15 marks overall.  Firstly, it was a standard dividend cover calculation followed by commentary on what can be deduced from the worked out figure.  Then, we had a calculation of EPS and a question on the benefits of using EPS as a measure of performance.  This type of question should be expected and we hope would have caused little problem for most well-prepared candidates.

Part (c) followed a similar format, with a calculation of information ratio and commentary on what can be deduced from the figure and in part (ii) why we would use the information ratio as a measure of performance.

These ratios are commonly tested and should have been practiced by candidates as part of their comprehensive revision strategy.

The format changed in (d) with candidates having to outline the main characteristics of a momentum investment strategy – this was only for four marks, so if knowledge was poor in this area should not have meant the loss of too many of the overall marks.  In part (ii) candidates were asked for the main differences in the structure and pricing of an OEIC and an investment trust. This was for much larger marks; 12 in total and we hope most candidates scored well here.

Part (e) of this first question tested economics; firstly (and for five marks) what was meant by the term ‘financial investment’ and its objective. In part (ii) candidates had to comment on the likely impact upon the UK economy and businesses of a sustained rise in inflation, and for this six marks were available.

Part (f) asked, for six marks, for the potential drawbacks of investing the entire sale proceeds of the business into an EIS and in part (ii) deferral relief was tested for a further four marks. These are common questions within the level 4 diploma papers as well as within AF4 so we hope that candidates had enough general knowledge around this private equity product to score well.

The penultimate question tested two investor biases that Vasileois was demonstrating and the reason for each. This was for four marks.

The final question, for another four marks, tested the terms ‘nominal return’, ‘real return’, and ‘absolute return’.

What was striking about this first case study was the number of small mark questions.  Out of the 16 questions asked, 11 of them awarded 3 or 4 marks. This enabled a lot of syllabus topics to be tested.

Here's a review of the Sep 25 #CII #AF4 exam. Share on X

Section B

Question 2 

In the second case study, we met a divorcee Isabelle who had a 15-year-old child.

We had a table of investments which included Exchange Traded Funds held within a stocks and shares ISA, a Child Trust Fund (invested in a unitised with-profits fund) and a Friendly Society policy.

We were also given details of Isabelle’s mother, Harriet, who had been recently widowed following the death of her husband who held £200,000 in stocks and shares ISAs.

The questions started with a test of the information that an ISA administrator would require in order to process an APS request followed by a test of what happens to an existing ISA when the plan holder dies.  The total question was for 11 marks.

Part (b) was also in two parts; firstly candidates had to calculate the total that Isabelle could invest on behalf of herself and her daughter in the remainder of the current tax year, maximising the allowances of their existing products. This was for six marks and shouldn’t have caused any real problems for candidates.  In part (ii) candidates had to state the options available to the child regarding her Child Trust Fund at ages 16 and 18. This was for four marks and although Child Trust Funds have been superseded by Junior ISAs, the options at these ages are the same.

Part (c) tested with-profits funds; firstly an explanation of the key features of the annual bonus (for three marks) then the key features of a final bonus and when it may be applied to a with-profits fund (for four marks) and finally, for another three marks, the objective of a market value reduction.  It may be the case that candidates don’t often advise on with-profits funds so if knowledge was weak in this area, it was another topic that didn’t represent too many of the overall marks.

In (d) candidates had to state four main reasons why the returns from Isabelle’s ETFs differ from each other and the underlying FTSE 100 Index and finally in (e) a comparison was needed of a passive fund tracking the FTSE 100 Index compared with an actively-managed fund investing across the same Index. This final question was for five marks.

Question 3 

The final case study introduced us to Douglas and Gwen, a married couple in their 70s.  They had combined gross pension income of £27,000 which fell short of their required gross income of £38,000 per year. We had details of their portfolio with a starting value of £200,000, a current value of £145,000 and the return values for 2023 and 2024.

Firstly, candidates had to identify four main benefits of them consolidating their current collective funds onto a platform which was a nice start to this last question.

Part (b) was in three parts; firstly candidates had to comment on the drawbacks of the strategy of taking capital as regular withdrawals from their portfolio since its inception. Then in part (ii) identify four actions to mitigate the effects of sequencing risk and in part (iii) state three ways in which the impact of capacity for loss can be mitigated.  In total 11 marks were available for part (b) and would have been a good test of application of knowledge as well as the information given in the case study.

In part (c) candidates had to calculate the standard deviation of the portfolio.  This is not an easy calculation to repeat in exam conditions and would have required practice when preparing for the exam to score all of the available nine marks on offer.

In part (d) there were questions on fixed-interest investments; firstly the main differences between conventional and index-linked gilts. This was for five marks. In part (ii) candidates had to explain ‘break-even inflation rate’.  This was for four marks and finally in part (iii) candidates had to identify three factors that would contribute to a change in the shape of an existing yield curve, whether steepening or flattening.

The final question of the paper was for four marks; candidates had to outline the drawbacks of relying upon dividends from equity income funds as a source of long-term income.  This was a nice practical question to end the exam.

Overall, this paper seemed fair with a test of many aspects of the AF4 syllabus with some familiar calculations and product features.  Candidates should always expect questions on the economy and investment theory and should always use the information given in the case studies to formulate their answers.

Comparison with the March 2025 Exam Paper 

Let’s look at what was tested in March 2025’s paper. This question paper can be found here. 

The topics covered were: 

• Factors that help establish ATR
• Differences between beta and alpha
• Calculation of alpha
• Benefits and drawbacks of thematic collective funds
• Money markets
• Differences between futures and options derivatives
• Investor biases
• Current account/capital account and the main roles of a central bank
• Calculation of net income
• Differences between an interim and a fixed dividend
• Factors that would cause a price increase in a share
• US Indices
• The Efficient Market Hypothesis
• Real value/compound annual returns
• Switching funds
• Rebalancing
• Running yields, redemption yields and target yields
• Factors to consider when assessing a sustainable withdrawal rate
• Risks within the portfolio
• Dividend discount models

As you can see, very different parts of the syllabus were tested in this previous session, which is a good reminder to look at various past papers to really help consider the breadth of topics, to become familiar with the format of the exam and the type of questions that can be asked as well as some of the more technical detail.

The AF4 exam is not easy and the main calculations should be practised along with a thorough revision of all investment products; a comprehensive study plan will help in making sure that everything from the syllabus is covered before the exam.

Grab the resources you need!

If you’re studying for your CII AF4 exam, and you’re wanting some extra practice, grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the AF4 mock paper taster now!

* The CII has updated their retention policy and now only provides the last two exam papers. Older papers referenced in this article may no longer be available on the CII website.