CurAlea Associates LLC has been named the Best Risk Management Software Firm for the second consecutive year. The Hedgeweek USA Awards recognise excellence among hedge fund managers and service providers around the world as determined by the votes of Hedgeweek’s 41,000 subscribers.
Princeton, New Jersey-based CurAlea Associates LLC was established in 2010 by Seb Calabro and Peter Ort (pictured) to provide risk advisory services to hedge funds and other buyside clients. The firm delivers high touch, high value-added services to clients via quantitative portfolio risk analyses and qualitative interpretations of portfolio risk.
CurAlea’s hedge fund clients are principally fundamental equity long/short managers and have aggregate AUM of approximately USD30 billion. While hedge funds remain the primary area of the firm’s focus, CurAlea has also been retained by banks and family offices for hedge fund due diligence, risk analysis, and asset allocation consulting. CurAlea works with clients on a project specific basis and on an ongoing retainer basis.
Ort notes that falling correlations across asset classes and among sectors and stocks have provided a favourable backdrop for CurAlea’s hedge fund clients in 2012 and 2013. “This provides a better environment for stock picking and generating alpha,” says Ort. He further notes that recent low levels of realised volatility cause traditional portfolio risk estimates such as VaR to understate potential losses and that hedge fund managers should focus more on stress tests and scenario analyses in this environment.
As part of its ongoing risk consulting services, CurAlea helps hedge fund managers better understand both aggregate portfolio risks as well as risk contribution at the sector and position level. CurAlea also offers perspective on whether client portfolio risk levels are consistent with their long term return objectives. Importantly, CurAlea has the ability to customise its analysis to meet specific client needs and requests.
Ort notes that CurAlea seeks to add value not only in each portfolio analysis, but also in a temporal risk analysis that shows a portfolio manager’s ‘risk footprint’ over time. “As we are now in our third year with some of our clients, we have accumulated enough data to show how a PM’s risk profile has changed over time and in different market environments,” says Ort. “Volatility levels at the end of Q1 this year were similar to last year. If a manager’s risk profile is materially different from 12 months ago we can explore the reasons why. What were they thinking about differently last year? That’s a useful conversation to have.”
CurAlea spends a fair amount of time with clients on how to size positions in a risk efficient fashion. Most clients use CurAlea’s analysis as another tool in their portfolio construction process. When CurAlea’s analysis is consistent with the PM’s conviction level based on their fundamental analysis, it can give the PM more confidence to adjust a position size. “Some managers use our analysis to make active changes in their portfolio whereas others prefer to use it as an additional tool in their overall risk framework,” says Ort.
On winning the award as best risk management software firm for the second consecutive year, Ort articulates: “It is particularly rewarding to win the Hedgeweek Award again because the selection process for the award is driven by our clients.”