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FREEZE IS ON AT GIANT MORTGAGE HEDGE FUND By RODDY BOYD
http://www.nypost.com/seven/10062007...t_mortgage.htm
Keep your powder dry...
http://www.nypost.com/seven/10062007...t_mortgage.htm
October 6, 2007 -- Ellington Capital Management, the country's largest mortgage-backed securities hedge fund, sent a letter to investors notifying them that redemptions and withdrawals in two of its funds would be suspended because of a sharp decline in the liquidity of certain mortgage- and asset-backed markets.
The Old Greenwich, Conn.-based hedge fund, which has $5.2 billion in assets, is considered a bellwether for measuring the health of the mortgage-backed securities market.
The fund's redemption suspension covered two mortgage-credit funds with about $1.9 billion in assets between them, according to the investor letter from Michael Vranos, the fund's general partner.
According to the letter, which was obtained by The Post, Ellington's move came after liquidity and value data provided by Wall Street's mortgage-bond desks at the end of September for the bonds in the portfolios varied so widely that Vranos and his colleagues could not assign a fair value to them.
The letter emphasizes that the redemption suspension was not a function of losses or investor withdrawals. The two funds, according to the letter, have a minimal amount of withdrawal requests and any that came in easily could have been handled out of available cash.
Ellington's other funds do have some of the same lower-rated mortgage credit bonds that forced the suspension in the two funds, but not enough to be affected by the valuation troubles, a fund official told The Post.
That Ellington even found itself in this bind is surprising given that the fund has actively diversified away from its roots as an aggressive mortgage-backed derivative trading operation in the 1990s.
At the end of August, Ellington's flagship fund, the $8 billion Ellington Overseas Partners fund, was up 8.18 percent.
The Old Greenwich, Conn.-based hedge fund, which has $5.2 billion in assets, is considered a bellwether for measuring the health of the mortgage-backed securities market.
The fund's redemption suspension covered two mortgage-credit funds with about $1.9 billion in assets between them, according to the investor letter from Michael Vranos, the fund's general partner.
According to the letter, which was obtained by The Post, Ellington's move came after liquidity and value data provided by Wall Street's mortgage-bond desks at the end of September for the bonds in the portfolios varied so widely that Vranos and his colleagues could not assign a fair value to them.
The letter emphasizes that the redemption suspension was not a function of losses or investor withdrawals. The two funds, according to the letter, have a minimal amount of withdrawal requests and any that came in easily could have been handled out of available cash.
Ellington's other funds do have some of the same lower-rated mortgage credit bonds that forced the suspension in the two funds, but not enough to be affected by the valuation troubles, a fund official told The Post.
That Ellington even found itself in this bind is surprising given that the fund has actively diversified away from its roots as an aggressive mortgage-backed derivative trading operation in the 1990s.
At the end of August, Ellington's flagship fund, the $8 billion Ellington Overseas Partners fund, was up 8.18 percent.