Ellington Sets Subprime Fund IPO

Jul 15 2009 | 10:20am ET

Hedge fund firm Ellington Management is moving forward with its plans to list its two-year-old subprime mortgage fund, albeit with greatly lowered expectations.

Ellington Finance, which Ellington set up with $250 million in August 2007, plans to raise up to $200 million in an initial public offering on the New York Stock Exchange. That’s a big comedown from Ellington chief Michael Vranos’ big hopes for the fund when it debuted: At the time, he said he wanted to raise $750 million in permanent capital for the vehicle, which invests primarily in residential mortgage-backed securities.

The newly-raised capital will be used to fund new investments within six months of the closing of the offering, Ellington Finance said in a regulatory filing. It will trade under the ticker symbol “EFC.”

In addition to subprime RMBS, the fund also invests in other mortgage-backed loans, as well as mortgage-related derivatives. The fund has had positive returns since its inception, Greenwich, Conn.-based Ellington said, and its net realized gain in the first quarter jumped more than 13-fold.

The fund currently manages $250.2 million, which an RMBS portfolio worth $366.7 million and derivatives valued at nearly $100 million.

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