Mike Vranos
Encyclopedia
Michael W. "Mike" Vranos is an American
hedge fund
manager and philanthropist who in the 1990s was referred to by some as the "most powerful man on Wall Street
." In 1993, he reportedly earned $15 million from trading mortgage bond
s. Fortune Magazine once called him "one of the best bond trader
s on Wall Street." According to a 2007 Wall Street Journal article, he has continued to be regarded as "the best-known mortgage-bond trader on Wall Street."
Vranos headed collateralized mortgage obligation
(CMO) trading in the early 1990s at Kidder Peabody at a time when that firm dominated the marketplace. Seizing the opportunity created by a bear market, he left to start his own firm, Ellington Management Group, in late 1994. That same year, Kidder Peabody fell on troubled times and was sold to PaineWebber. In spite of being affected by fall-out from the Long-Term Capital Management
debacle in 1998, as of April 2004, Ellington had delivered a composite annualized return of 15.4%, after fees. Ellington continues to market a variety of investment offerings.
, United States
. In his youth, he worked as a bouncer and earned the title of Mr. Teen Connecticut as a bodybuilder. Mr. Vranos earned his bachelor of arts
degree
in mathematics
from Harvard University
in 1983 with both magna cum laude and Phi Beta Kappa honors.
over $200 billion in CMOs, which was about 20% of all CMOs issued during that period and nearly double the next largest Wall Street firm. Vranos was noted for having turned his collateralized mortgage obligation trading role into a money-making machine. In 1991, Vranos was named Kidder Peabody’s Man of the Year. His 1992 salary was estimated at between $10–15 million.
Kidder Peabody fell on troubled times during the bear market of 1994. Michael Carpenter, the CEO of Kidder from 1989 to 1994 was forced to resign in July 1994. Then, when the number two ranking executive at the firm, Edward A. Cerullo, resigned from Kidder Peabody a few weeks later, Vranos was one of the most watched firm members. During this period, Vranos was highly praised by Jack Welch
, chairman of Kidder Peabody’s parent company, General Electric
, for his handling of the bear market. However, as market conditions grew more severe, Vranos seized the opportunity to start his own firm in late 1994. Kidder was ultimately sold to Paine Webber
.
debacle in 1998. The firm issued a public statement describing its borrowings to quell public fears, which was quite unusual for hedge funds at the time. It clarified that although it was meeting margin call
s by unloading hundreds of millions of dollars in assets over a two day period, losses were limited. According to one report, some of his hedge funds lost around 25% of their value as he liquidated $2 billion in assets. However, the funds recovered quickly, and from its December 1994 inception through April 2004, the firm delivered a composite annualized return of 15.4%, after fees.
In 2000, Ellington bid unsuccessfully on Laser Mortgage Management Inc., a mortgage real estate investment trust that was considering closing.
In October 2007 one of his funds was again caught by the markets when it fell 22%, while the average hedge fund was up around 10% year-to-date. Ellington suspended redemptions from the fund. As of 2007, Vranos and Ellington Management managed $5.4 billion in hedge funds and private accounts, and an additional $1.2 billion in a managed account, while also managing almost $23 billion in collateralized debt obligation
s
In June 2007, Vranos launched a private placement
of a new entity, Ellington Financial LLC, to institutional investors. The company aimed to specialize in subprime mortgages, and the offering statement was dated for July 12, 2007. The deal was underwriten by Friedman Billings Ramsey
and although originally slated for a $750 million offering, evolving market conditions only allowed for a $250 million capital raise. Before the private placement, a New York Times columnist noted that a portion of the private placement might be used to purchase risky tranche
s from bankrupt subprime lender New Century Financial Corporation and noted the potential difficulty in valuing such instruments.
. In 2001, Slate.com finance
columnist
Rob Walker and alternative cartoonist
Josh Neufeld
featured Vranos in their comic book
, Titans of Finance (Alternative Comics
, 2001, ISBN 1891867059).
Vranos has supported both Christopher Dodd
and Barack Obama
on the Democratic
side and Rudy Giuliani
on the Republican
side of the 2008 Presidential Election.
Vranos has been active in charitable work and in 2007 was the recipient of the Lifetime Award for Caring from Hedge Funds Care, a charity supported by the hedge fund industry. Vranos serves on the Board of Directors of Boys and Girls Harbor
, the East Harlem School, Hedge Funds Care, and the Stamford Shelter for the Homeless.
In 1981, Vranos was declared Mr. Teen Connecticut in the state's bodybuilding championships, and he became known as "Captain Iron" in bodybuilding circles. Vranos is known for breaking up business meetings to issue armwrestling challenges.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
manager and philanthropist who in the 1990s was referred to by some as the "most powerful man on Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
." In 1993, he reportedly earned $15 million from trading mortgage bond
Mortgage bond
A mortgage bond is a bond backed by a pool of mortgages on a real estate asset such as a house. More generally, bonds which are secured by the pledge of specific assets are called mortgage bonds. Mortgage bonds can pay interest in either monthly, quarterly or semiannual periods....
s. Fortune Magazine once called him "one of the best bond trader
Trader (finance)
A trader is someone in finance who buys and sells financial instruments such as stocks, bonds, commodities and derivatives. A broker who simply fills buy or sell orders is not a trader, as they are merely executing instructions given to them. According to the Wall Street Journal in 2004, a managing...
s on Wall Street." According to a 2007 Wall Street Journal article, he has continued to be regarded as "the best-known mortgage-bond trader on Wall Street."
Vranos headed collateralized mortgage obligation
Collateralized mortgage obligation
A collateralized mortgage obligation is a type of financial debt vehicle that was first created in 1983 by the investment banks Salomon Brothers and First Boston for U.S. mortgage lender Freddie Mac. A collateralized mortgage obligation (CMO) is a type of financial debt vehicle that was first...
(CMO) trading in the early 1990s at Kidder Peabody at a time when that firm dominated the marketplace. Seizing the opportunity created by a bear market, he left to start his own firm, Ellington Management Group, in late 1994. That same year, Kidder Peabody fell on troubled times and was sold to PaineWebber. In spite of being affected by fall-out from the Long-Term Capital Management
Long-Term Capital Management
Long-Term Capital Management L.P. was a speculative hedge fund based in Greenwich, Connecticut that utilized absolute-return trading strategies combined with high leverage...
debacle in 1998, as of April 2004, Ellington had delivered a composite annualized return of 15.4%, after fees. Ellington continues to market a variety of investment offerings.
Youth
Vranos was raised in Ellington, ConnecticutEllington, Connecticut
Ellington is a town in Tolland County, Connecticut, United States. Ellington was incorporated in May, 1786, from East Windsor. As of the 2000 census, the town population was 12,921...
, United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. In his youth, he worked as a bouncer and earned the title of Mr. Teen Connecticut as a bodybuilder. Mr. Vranos earned his bachelor of arts
Bachelor of Arts
A Bachelor of Arts , from the Latin artium baccalaureus, is a bachelor's degree awarded for an undergraduate course or program in either the liberal arts, the sciences, or both...
degree
Academic degree
An academic degree is a position and title within a college or university that is usually awarded in recognition of the recipient having either satisfactorily completed a prescribed course of study or having conducted a scholarly endeavour deemed worthy of his or her admission to the degree...
in mathematics
Mathematics
Mathematics is the study of quantity, space, structure, and change. Mathematicians seek out patterns and formulate new conjectures. Mathematicians resolve the truth or falsity of conjectures by mathematical proofs, which are arguments sufficient to convince other mathematicians of their validity...
from Harvard University
Harvard University
Harvard University is a private Ivy League university located in Cambridge, Massachusetts, United States, established in 1636 by the Massachusetts legislature. Harvard is the oldest institution of higher learning in the United States and the first corporation chartered in the country...
in 1983 with both magna cum laude and Phi Beta Kappa honors.
Kidder Peabody
Vranos started work at Kidder Peabody after graduation from Harvard in 1983. He was the youngest Managing Director in the 130-year history of Kidder Peabody. During his reign at Kidder Peabody from 1990–1994, Kidder underwroteUnderwriting
Underwriting refers to the process that a large financial service provider uses to assess the eligibility of a customer to receive their products . The name derives from the Lloyd's of London insurance market...
over $200 billion in CMOs, which was about 20% of all CMOs issued during that period and nearly double the next largest Wall Street firm. Vranos was noted for having turned his collateralized mortgage obligation trading role into a money-making machine. In 1991, Vranos was named Kidder Peabody’s Man of the Year. His 1992 salary was estimated at between $10–15 million.
Kidder Peabody fell on troubled times during the bear market of 1994. Michael Carpenter, the CEO of Kidder from 1989 to 1994 was forced to resign in July 1994. Then, when the number two ranking executive at the firm, Edward A. Cerullo, resigned from Kidder Peabody a few weeks later, Vranos was one of the most watched firm members. During this period, Vranos was highly praised by Jack Welch
Jack Welch
John Francis "Jack" Welch, Jr. is an American chemical engineer, business executive, and author. He was Chairman and CEO of General Electric between 1981 and 2001...
, chairman of Kidder Peabody’s parent company, General Electric
General Electric
General Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
, for his handling of the bear market. However, as market conditions grew more severe, Vranos seized the opportunity to start his own firm in late 1994. Kidder was ultimately sold to Paine Webber
Paine Webber
Paine Webber and Company was an American stock brokerage and asset management firm that was acquired by the Swiss bank UBS AG in 2000. The company was founded in 1880 in Boston, Massachusetts, by William Alfred Paine and Wallace G. Webber. Operating with two employees, they leased premises at 48...
.
Ellington Management Group
In late 1994, Vranos founded Ellington Management Group, which grew into a $21 billion company. Ellington was affected by the Long-Term Capital ManagementLong-Term Capital Management
Long-Term Capital Management L.P. was a speculative hedge fund based in Greenwich, Connecticut that utilized absolute-return trading strategies combined with high leverage...
debacle in 1998. The firm issued a public statement describing its borrowings to quell public fears, which was quite unusual for hedge funds at the time. It clarified that although it was meeting margin call
Margin Call
Margin Call is a 2011 American independent drama film, written and directed by J.C. Chandor. The film has an ensemble cast that includes Kevin Spacey, Demi Moore, Paul Bettany, Jeremy Irons, Zachary Quinto, Stanley Tucci, Simon Baker, and Penn Badgley...
s by unloading hundreds of millions of dollars in assets over a two day period, losses were limited. According to one report, some of his hedge funds lost around 25% of their value as he liquidated $2 billion in assets. However, the funds recovered quickly, and from its December 1994 inception through April 2004, the firm delivered a composite annualized return of 15.4%, after fees.
In 2000, Ellington bid unsuccessfully on Laser Mortgage Management Inc., a mortgage real estate investment trust that was considering closing.
In October 2007 one of his funds was again caught by the markets when it fell 22%, while the average hedge fund was up around 10% year-to-date. Ellington suspended redemptions from the fund. As of 2007, Vranos and Ellington Management managed $5.4 billion in hedge funds and private accounts, and an additional $1.2 billion in a managed account, while also managing almost $23 billion in collateralized debt obligation
Collateralized debt obligation
Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...
s
In June 2007, Vranos launched a private placement
Private placement
Private placement is a funding round of securities which are sold without an initial public offering, usually to a small number of chosen private investors...
of a new entity, Ellington Financial LLC, to institutional investors. The company aimed to specialize in subprime mortgages, and the offering statement was dated for July 12, 2007. The deal was underwriten by Friedman Billings Ramsey
Friedman Billings Ramsey
Arlington Asset Investment Corp formerly known as Friedman, Billings, Ramsey Group Inc., , is a real estate investment trust headquartered in Arlington, Virginia...
and although originally slated for a $750 million offering, evolving market conditions only allowed for a $250 million capital raise. Before the private placement, a New York Times columnist noted that a portion of the private placement might be used to purchase risky tranche
Tranche
In structured finance, a tranche is one of a number of related securities offered as part of the same transaction. The word tranche is French for slice, section, series, or portion, and is cognate to English trench . In the financial sense of the word, each bond is a different slice of the deal's...
s from bankrupt subprime lender New Century Financial Corporation and noted the potential difficulty in valuing such instruments.
Personal
Vranos currently lives in Weston, ConnecticutWeston, Connecticut
Weston is a town in Fairfield County, Connecticut. The population was 10,179 at the 2010 census. The town is served by Route 57 and Route 53, both of which run through the town center. About 19% of the town's workforce commutes to New York City, about to the southwest.Like many towns in...
. In 2001, Slate.com finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
columnist
Columnist
A columnist is a journalist who writes for publication in a series, creating an article that usually offers commentary and opinions. Columns appear in newspapers, magazines and other publications, including blogs....
Rob Walker and alternative cartoonist
Cartoonist
A cartoonist is a person who specializes in drawing cartoons. This work is usually humorous, mainly created for entertainment, political commentary or advertising...
Josh Neufeld
Josh Neufeld
Josh Neufeld is an alternative cartoonist known for his nonfiction comics on subjects like Hurricane Katrina, international travel, and finance, as well as his collaborations with writers like Harvey Pekar and Brooke Gladstone...
featured Vranos in their comic book
Comic book
A comic book or comicbook is a magazine made up of comics, narrative artwork in the form of separate panels that represent individual scenes, often accompanied by dialog as well as including...
, Titans of Finance (Alternative Comics
Alternative Comics (publisher)
Alternative Comics is a U.S. independent graphic novel and comic book publisher which operated from 1993–2007. Located in Gainesville, Florida, it is owned and operated by its founder, attorney Jeff Mason...
, 2001, ISBN 1891867059).
Vranos has supported both Christopher Dodd
Christopher Dodd
Christopher John "Chris" Dodd is an American lawyer, lobbyist, and Democratic Party politician who served as a United States Senator from Connecticut for a thirty-year period ending with the 111th United States Congress....
and Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
on the Democratic
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
side and Rudy Giuliani
Rudy Giuliani
Rudolph William Louis "Rudy" Giuliani KBE is an American lawyer, businessman, and politician from New York. He served as Mayor of New York City from 1994 to 2001....
on the Republican
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...
side of the 2008 Presidential Election.
Vranos has been active in charitable work and in 2007 was the recipient of the Lifetime Award for Caring from Hedge Funds Care, a charity supported by the hedge fund industry. Vranos serves on the Board of Directors of Boys and Girls Harbor
Boys and Girls Harbor
Boys and Girls Harbor is an educational organization. The Charter school and its various other recreational and guidance programs are located in East and Central Harlem, New York, USA...
, the East Harlem School, Hedge Funds Care, and the Stamford Shelter for the Homeless.
In 1981, Vranos was declared Mr. Teen Connecticut in the state's bodybuilding championships, and he became known as "Captain Iron" in bodybuilding circles. Vranos is known for breaking up business meetings to issue armwrestling challenges.