Ellington Blames ‘Enormous’ Spreads For Redemption Suspension

Oct 9 2007 | 6:58am ET

Ellington Management Group has suspended redemptions from a pair of mortgage-backed securities funds while at the same time suggesting that withdrawals may be allowed “very soon.”

Old Greenwich, Conn.-based Ellington blamed the lack of trading in some subprime mortgage-backed bonds, which makes it difficult to value the funds’ assets. In a letter to investors, dated Sept. 30, CEO Michael Vranos and Vice Chairman Richard Brounstein wrote that “enormously wide spreads” have made it impossible to be “simultaneously fair to both investors redeeming from these funds and to investors remaining in these funds.”

The affected hedge funds are the New Ellington Credit Overseas and New Ellington Credit Partners funds. Combined, they have some $1.9 billion in assets.

Vranos and Brounstein sought to assure investors that Ellington is not about to go the way of fellow subprime-hit hedge funds like Basis Capital, Bear Stearns Asset Management and Sowood Capital Management.

“We emphasize we are not taking this action in response to pending redemption requests, the volume of which is unexceptional, nor are we taking this action in response to margin calls or actions by creditors, which have generally been in line with our expectations and have been easily handled by our cash positions, which remain substantial,” they wrote.

Vranos and Brounstein said they will be receiving dealer valuations of the funds’ positions as of the end of the third quarter. The letter said Ellington would distribute some of its “substantial” cash should the firm be unable to lift the redemption suspension.


In Depth

AIMA: Smaller Firms Remain the Lifeblood of the Hedge Fund Industry

Jul 26 2017 | 5:55pm ET

It is a hedge fund industry truism that the largest managers receive the most attention...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Rastegar: PE Real Estate Gains Momentum as Uncertainty Rises

Jul 21 2017 | 6:04pm ET

The steady march of equity markets and fundamental shift in the direction of Fed...