Ellington Management Group

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]

Ellington Management Group

Company type	Limited Liability Company
Industry	Hedge fund
Founded	1994
Founder	Mike 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 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]