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Ellington Management Group

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

Ellington Management Group is a multi-billion 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]

History

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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

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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

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In June 2007, Ellington Financial LLC was launched.[10] The offering primarily targeted investments in non-agency mortgage-backed securities. The deal was underwritten 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]

References

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  1. ^ "Ellington: An Experienced and Successful Team". Ellington Management Group, L.L.C. Archived from the original on December 12, 2007. Retrieved December 9, 2007.
  2. ^ Williamson, Christine (September 2, 2019). "Managers turn up volume with Billy Idol fundraiser". Pensions & Investments. Retrieved February 5, 2018.
  3. ^ Pacelle, Mitchell (October 13, 1998). "Vranos's Ellington Management Sells Big Chunks of Hedge Fund's Holdings". The Wall Street Journal. Retrieved February 5, 2018.
  4. ^ Chris Byron. "Another harrowing hedge fund tale". MSNBC. Retrieved February 10, 2014.
  5. ^ Reed Abelson (October 13, 1998). "THE MARKETS: Market Place; Still Another Hedge Fund Seems to Be in Financial Peril". The New York Times. Retrieved December 9, 2007.
  6. ^ "Digest". The Washington Post. October 13, 1998. Archived from the original on June 11, 2014. Retrieved April 22, 2012. 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. October 14, 1998. Archived from the original on June 11, 2014. Retrieved April 22, 2012. 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 (October 18, 1998). "INVESTING: DIARY; Pssst. . .We Have No Problems At This Hedge Fund. Really". The New York Times. Retrieved December 9, 2007.
  9. ^ "Hedge Fund Firm Says It Covered Its Losses". The New York Times. October 18, 1998. Retrieved December 9, 2007.
  10. ^ a b c d e Morgenson, Gretchen (July 22, 2007). "Mr. Vranos Has a Deal for You". The New York Times. Retrieved December 10, 2007.
  11. ^ "UBS hedge fund exposure". The Independent. October 17, 1998. Archived from the original on September 7, 2012. Retrieved April 22, 2012. 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. June 29, 2004. Archived from the original on October 25, 2012. Retrieved August 30, 2009.
  14. ^ Trincal, Emma (July 31, 2007). "Ellington, Citadel, Marathon Emerge as Distressed Players". Daily News. Archived from the original on June 11, 2014. Retrieved April 22, 2012.
  15. ^ Michael Peltz (June 29, 2004). "Ellington's Vranos Says He Won't Crash Again Amid Rate Increase". Bloomberg. Retrieved March 18, 2014.
  16. ^ a b Zuckerman, Gregory (December 6, 2007). "Vranos May Try to Reopen Ellington Credit Fund". The Wall Street Journal Online. Dow Jones & Company, Inc. Retrieved December 9, 2007.
  17. ^ Pulliam, Susan, Randall Smith and Michael Siconolfi (October 12, 2007). "U.S. Investors Face An Age of Murky Pricing". The Wall Street Journal Online. Dow Jones & Company, Inc. Retrieved December 10, 2007.{{cite news}}: 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. October 15, 2010. Archived from the original on June 11, 2014. Retrieved April 22, 2012.
  20. ^ "Securities and Exchange Commission EDGAR Filings". Retrieved April 28, 2012.
  21. ^ "EARN IPO". NASDAQ. Retrieved February 11, 2014.
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