10/13/2010

Ellington Lands Big Mortgage-Bond Portfolio

Ellington Management this month won a mandate to run a $500 million portfolio of mortgage-backed securities.

The assignment came from unidentified investors who pulled their holdings from TCW earlier this year following the departure of star bond trader Jeffrey Gundlach. Ellington, a specialist in mortgage-backed securities, created a new vehicle to accommodate the investors.

Los Angeles-based TCW, an asset-management arm of French bank Societe Generale, has lost a number of big clients since acquiring Metropolitan West Asset Management in late 2009 and forcing Gundlach out at the beginning of this year. Since then, Gundlach has opened a fixed-income shop called DoubleLine.

October has been a good month for Ellington, an Old Greenwich, Conn., firm founded in 1994 by former Kidder Peabody bond trader Michael Vranos. On Oct. 4, a specialty-finance entity dubbed Ellington Financial began trading on the New York Stock Exchange. The initial public offering raised $101 million, which Ellington plans to use to buy mortgage bonds backed by subprime and Alt-A loans.

Like many bond-fund managers, Ellington suspended withdrawals from two of its hedge funds during the credit crisis. Assets under management have slipped from a peak of more than $5 billion in late 2007 to around $3 billion today. Last year, the firm began diversifying its product line, launching a pair of long/short equity funds.

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