Ellington Management Group

Ellington Management Group is a multi-million dollar hedge fund operation.[1] As of June 2019, the firm was reportedly managing $8.5 billion in structured products and other credit instruments.[2]

Ellington Management Group
Limited Liability Company
IndustryHedge fund
Founded1994
FounderMike Vranos
Laurence Penn

History

The firm was co-founded in 1994 by Mike Vranos and Laurence Penn with funding from Ziff brothers investments.[3] By the end of 1995 the firm had become a three-fund operation with a variety of assets.[4]

Ellington was affected by the Long-Term Capital Management debacle in 1998.[5] For a few days in mid-October, the firm sold mortgage securities to lower its funds' leverage.[6][7] The firm issued a public statement describing its borrowings to quell public fears, which was considered unusual for hedge funds at the time.[8] It clarified that although it was meeting margin calls by unloading hundreds of millions of dollars in assets over a two-day period, losses were limited.[9] One report suggests some of Ellington's hedge funds may have temporarily lost around 25% of their value as they liquidated $2 billion in assets[10] after allegedly missing a margin call from UBS.[11][12] However, from its December 1994 inception through April 2004, the firm delivered a composite annualized return of 15.4%, after fees.[13]

Notable investments

Various of Ellington's funds have invested in distressed mortgage-backed securities over time.[14] By 2004 their $3 billion in hedge fund assets included mortgage derivatives.[15] In October 2007, as the future credit performance of residential mortgages became increasingly uncertain, one of the funds is reported to have fallen in value by 22%[16] and to have temporarily suspended redemptions pending greater clarity around valuations.[17] As of 2007, Ellington Management's assets included $1.2 billion in a managed account, $5.4 billion in hedge funds and private accounts, and almost $23 billion in collateralized debt obligations.[10] In 2014 an office was opened in London, England in order to expand into the European market.[18]

Subsidiaries

In June 2007, Ellington Financial LLC was launched.[10] The offering primarily targeted investments in non-agency mortgage-backed securities. The deal was underwriten by Friedman Billings Ramsey and although originally slated for a $750 million offering,[10] evolving market conditions only allowed for a $250 million capital raise.[16] Before the private placement, a New York Times columnist noted that a portion of the private placement might be used to purchase risky tranches from bankrupt subprime lender New Century Financial Corporation and noted the potential difficulty in valuing such instruments.[10] In October 2010, Ellington Financial LLC went public, debuting on the NYSE.[19] According to its public filings, Ellington Financial invests primarily in non-agency mortgage-backed securities, but also holds agency pools and other mortgage-related securities, and had a total return of 59% between its August 2007 inception and the end of 2011.[20]

Ellington Residential Mortgage REIT, chaired and founded by Mike Vranos, went public on the NYSE after its IPO in late 2013, trading under the ticker symbol EARN.[21]

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References
  1. "Ellington: An Experienced and Successful Team". Ellington Management Group, L.L.C. Archived from the original on 2007-12-12. Retrieved 2007-12-09.
  2. Williamson, Christine (2 September 2019). "Managers turn up volume with Billy Idol fundraiser". Pensions & Investments. Retrieved 5 February 2018.
  3. Pacelle, Mitchell (13 October 1998). "Vranos's Ellington Management Sells Big Chunks of Hedge Fund's Holdings". Wall Street Journal. Retrieved 5 February 2018.
  4. Chris Byron. "Another harrowing hedge fund tale". MSNBC. Retrieved February 10, 2014.
  5. Reed Abelson (1998-10-13). "THE MARKETS: Market Place; Still Another Hedge Fund Seems to Be in Financial Peril". The New York Times Company. Retrieved 2007-12-09.
  6. "Digest". The Washington Post. 1998-10-13. Archived from the original on 2014-06-11. Retrieved 2012-04-22. Ellington Capital Management, a hedge fund run by former Kidder, Peabody trader Michael Vranos, offered $1.5 billion in mortgage securities yesterday, traders said, despite weak investor demand for mortgages.
  7. "Picking Up The Bond Pieces While Waiting For The Next Shoe To Drop". Post-Tribune. 1998-10-14. Archived from the original on 2014-06-11. Retrieved 2012-04-22. Monday was a holiday for the bond market, but it was a work day for some trading desks attempting to find buyers for securities and derivatives that leveraged funds were forced to liquidate to meet margin calls. Come Tuesday, the newspapers were reporting that Ellington Fund, run by former Kidder, Peabody mortgage whiz Michael Vranos, had become the latest casualty of the great deleveraging trade of 1998, driven by a huge widening of credit spreads that punished holders - indiscriminately - of all instruments except those issued by the U.S. Treasury.
  8. Abelson, Reed (1998-10-18). "INVESTING: DIARY; Pssst. . .We Have No Problems At This Hedge Fund. Really". The New York Times Company. Retrieved 2007-12-09.
  9. "Hedge Fund Firm Says It Covered Its Losses". The New York Times Company. 1998-10-18. Retrieved 2007-12-09.
  10. Morgenson, Gretchen (2007-07-22). "Mr. Vranos Has a Deal for You". The New York Times Company. Retrieved 2007-12-10.
  11. "UBS hedge fund exposure". The Independent. 1998-10-17. Archived from the original on 2012-09-07. Retrieved 2012-04-22. UBS last night refused to comment on reports that it had liquidated $250m of bonds held as collateral after Ellington allegedly missed a margin call this week.
  12. Jerry W. Markham (2006). A Financial History of Modern U.S. Corporate Scandals: From Enron to Reform. M.E. Sharpe. p. 440. ISBN 9780765615831. Retrieved March 18, 2014.
  13. "Ellington's Vranos Says He Won't Crash Again Amid Rate Increase". Bloomberg News. 2004-06-29. Archived from the original on 2012-10-25. Retrieved 2009-08-30.
  14. Trincal, Emma (2007-07-31). "Ellington, Citadel, Marathon Emerge as Distressed Players". Daily News. Archived from the original on 2014-06-11. Retrieved 2012-04-22.
  15. Michael Peltz (June 29, 2004). "Ellington's Vranos Says He Won't Crash Again Amid Rate Increase". Bloomberg. Retrieved March 18, 2014.
  16. Zuckerman, Gregory (2007-12-06). "Vranos May Try to Reopen Ellington Credit Fund". The Wall Street Journal Online. Dow Jones & Company, Inc. Retrieved 2007-12-09.
  17. Pulliam, Susan, Randall Smith and Michael Siconolfi (2007-10-12). "U.S. Investors Face An Age of Murky Pricing". The Wall Street Journal Online. Dow Jones & Company, Inc. Retrieved 2007-12-10.CS1 maint: multiple names: authors list (link)
  18. Stephen Foley (December 22, 2013). "US hedge funds set to expand in Europe". Financial Times. Retrieved April 4, 2014.
  19. "In Hindsight". Investment Dealers' Digest via Highbeam. 2010-10-15. Archived from the original on 2014-06-11. Retrieved 2012-04-22.
  20. "Securities and Exchange Commission EDGAR Filings". Retrieved 2012-04-28.
  21. "EARN IPO". NASDAQ. Retrieved February 11, 2014.
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