Michael W. Vranos is an American
hedge fund
A hedge fund is a pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction, and risk management techniques in an attempt to improve performance, such as sho ...
manager and philanthropist who in the 1990s was referred to by some as the "most powerful man on
Wall Street
Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for t ...
." In 1993, he reportedly earned
$15 million from trading
mortgage bond
A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...
s.
''
Fortune Magazine
''Fortune'' is an American multinational business magazine headquartered in New York City. It is published by Fortune Media Group Holdings, owned by Thai businessman Chatchaval Jiaravanon. The publication was founded by Henry Luce in 1929. The ...
'' once called him "one of the best bond
traders on Wall Street."
[ According to a 2007 '']Wall Street Journal
''The Wall Street Journal'' is an American business-focused, international daily newspaper based in New York City, with international editions also available in Chinese and Japanese. The ''Journal'', along with its Asian editions, is published ...
'' article, he has continued to be regarded as "the best-known mortgage-bond trader on Wall Street."
Vranos headed collateralized mortgage obligation
A collateralized mortgage obligation (CMO) is a type of complex debt security that repackages and directs the payments of principal and interest from a collateral pool to different types and maturities of securities, thereby meeting investor need ...
(CMO) trading in the early 1990s at Kidder Peabody
Kidder, Peabody & Co. was an American securities firm, established in Massachusetts in 1865. The firm's operations included investment banking, brokerage, and trading.
The firm was sold to General Electric in 1986. Following heavy losses, it was ...
at a time when that firm dominated the marketplace.[ Seizing the opportunity created by a ]bear market
A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
, 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 L.P. (LTCM) was a highly-leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York.
LTCM was founded in 1 ...
debacle in 1998,[ as of April 2004, Ellington had delivered a composite annualized return of 15.4%, after fees.]
Early life and education
Vranos was born in Worcester, Massachusetts
Worcester ( , ) is a city and county seat of Worcester County, Massachusetts, United States. Named after Worcester, England, the city's population was 206,518 at the 2020 United States census, 2020 census, making it the second-List of cities i ...
to Alexander and Aglaea Vranos, both of Greek descent. He was then raised in Ellington, Connecticut
Ellington is a town in Tolland County, Connecticut, United States. Ellington was incorporated in May 1786, from East Windsor. As of the 2020 census, the town population was 16,426.
History
Originally the area in what is now Ellington was named ...
, United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
. In his youth, he worked as a bouncer and earned the title of Mr. Teen Connecticut as a bodybuilder. He earned the nickname "The Arm". Mr. Vranos earned his Bachelor of Arts
Bachelor of arts (BA or AB; from the Latin ', ', or ') is a bachelor's degree awarded for an undergraduate program in the arts, or, in some cases, other disciplines. A Bachelor of Arts degree course is generally completed in three or four years ...
degree
Degree may refer to:
As a unit of measurement
* Degree (angle), a unit of angle measurement
** Degree of geographical latitude
** Degree of geographical longitude
* Degree symbol (°), a notation used in science, engineering, and mathematics
...
in mathematics
Mathematics is an area of knowledge that includes the topics of numbers, formulas and related structures, shapes and the spaces in which they are contained, and quantities and their changes. These topics are represented in modern mathematics ...
from Harvard University
Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
in 1983 with both ''magna cum laude
Latin honors are a system of Latin phrases used in some colleges and universities to indicate the level of distinction with which an academic degree has been earned. The system is primarily used in the United States. It is also used in some So ...
'' and Phi Beta Kappa
The Phi Beta Kappa Society () is the oldest academic honor society in the United States, and the most prestigious, due in part to its long history and academic selectivity. Phi Beta Kappa aims to promote and advocate excellence in the liberal a ...
honors.[ He began pursuing a PhD in Mathematics, before beginning his work on Wall Street.]
Kidder Peabody
Vranos started work at Kidder Peabody
Kidder, Peabody & Co. was an American securities firm, established in Massachusetts in 1865. The firm's operations included investment banking, brokerage, and trading.
The firm was sold to General Electric in 1986. Following heavy losses, it was ...
after graduation from Harvard in 1983. He was the youngest Managing Director
A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especially ...
in the 130-year history of Kidder Peabody. During his reign at Kidder Peabody from 1990–1994, Kidder underwrote 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 compensation was estimated at between $10–15 million, according to the '']USA Today
''USA Today'' (stylized in all uppercase) is an American daily middle-market newspaper and news broadcasting company. Founded by Al Neuharth on September 15, 1982, the newspaper operates from Gannett's corporate headquarters in Tysons, Virgini ...
'', while ''The Washington Post
''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large nati ...
'' reported it in the $5–7 million range. By 1993 he was the highest paid employee at Kidder Peabody, and it was said that as Kidder entered financial trouble in the early 1990s that the profitability of the company was largely on Vranos' back.
Kidder Peabody fell on troubled times during the bear market of 1994. Losses in the mortgage-bonds department headed by Vranos for the second quarter of 1994 were $30 million. Michael Carpenter, the CEO
A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especially ...
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
John Francis Welch Jr. (November 19, 1935 – March 1, 2020) was an American business executive, chemical engineer, and writer. He was Chairman and CEO of General Electric (GE) between 1981 and 2001.
When Welch retired from GE, he receive ...
, chairman of Kidder Peabody’s parent company, General Electric
General Electric Company (GE) is an American multinational conglomerate founded in 1892, and incorporated in New York state and headquartered in Boston. The company operated in sectors including healthcare, aviation, power, renewable energ ...
, for his handling of the bear market.[ However, as market conditions grew more severe, Vranos left to start his own firm in late 1994. Kidder was ultimately sold to ]Paine Webber
PaineWebber & Co. was an American investment bank and stock brokerage firm that was acquired by the Swiss bank UBS in 2000. The company was founded in 1880 in Boston, Massachusetts, by William Alfred Paine and Wallace G. Webber. Operating with ...
.[
]
Ellington Management Group
In late 1994, Vranos founded Ellington Management Group, which grew into a $21 billion company.[ He founded the firm with Laurence Penn, whom Vranos knew at Harvard and who was in charge of Lehman Brother's mortgage securities training before co-founding Ellington with funding from Ziff Brothers Investments. By the end of 1995 the firm had become a three-fund operation with a variety of assets.
Ellington was affected by the ]Long-Term Capital Management
Long-Term Capital Management L.P. (LTCM) was a highly-leveraged hedge fund. In 1998, it received a $3.6 billion bailout from a group of 14 banks, in a deal brokered and put together by the Federal Reserve Bank of New York.
LTCM was founded in 1 ...
debacle in 1998.[ For a few days in mid-October, the firm sold mortgage securities to lower its funds' leverage. The firm issued a public statement describing its borrowings to quell public fears, which was considered unusual for hedge funds at the time.] It clarified that although it was meeting margin call
''Margin Call'' is a 2011 American drama film written and directed by J. C. Chandor in his feature directorial debut. The principal story takes place over a 24-hour period at a large Wall Street investment bank during the initial stages of the ...
s by unloading hundreds of millions of dollars in assets over a two-day period, losses were limited. One report suggests some of his hedge funds may have temporarily lost around 25% of their value as he liquidated $2 billion in assets[ after allegedly missing a margin call from ]UBS
UBS Group AG is a multinational Investment banking, investment bank and financial services company founded and based in Switzerland. Co-headquartered in the cities of Zürich and Basel, it maintains a presence in all major financial centres ...
. However, from its December 1994 inception through April 2004, the firm delivered a composite annualized return of 15.4%, after fees.[
In 2000, Ellington bid on Laser Mortgage Management Inc., a mortgage real estate investment trust that was considering closing, but ultimately did not purchase it. Various of Ellington's funds have invested in distressed mortgage-backed securities over time. By 2004 his $3 billion in hedge fund assets including mortgage derivatives. In October 2007, as the future credit performance of residential mortgages became increasingly uncertain, one of his funds is reported to have fallen in value by 22%] and to have temporarily suspended redemptions pending greater clarity around valuations. 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
A collateralized debt obligation (CDO) is a type of structured asset-backed security (ABS). Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities (MBS).Lepke ...
s.[ In 2014 Vranos opened an office for Ellington Management in ]London, England
London is the capital and largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary down to the North Sea, and has been a major s ...
in order to expand into the European market.
In June 2007, Vranos launched a private placement
Private placement (or non-public offering) is a funding round of securities which are sold not through a public offering, but rather through a private offering, mostly to a small number of chosen investors. Generally, these investors include friend ...
of a new entity, Ellington Financial LLC, to institutional investors
An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked co ...
. The offering primarily targeted investments in non-agency mortgage-backed securities. The deal was underwritten by Friedman Billings Ramsey
Arlington Asset Investment Corp. is a mortgage real estate investment trust headquartered in McLean, Virginia.
The company is an investment firm that focuses primarily on investing in mortgage related assets and residential real estate. The comp ...
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
In structured finance, a tranche is one of a number of related securities offered as part of the same transaction. In the financial sense of the word, each bond is a different slice of the deal's risk. Transaction documentation (see indenture) u ...
s from bankrupt
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debt ...
subprime lender New Century Financial Corporation
New Century Financial Corporation was a real estate investment trust that originated mortgage loans in the United States through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation.
It was founded in 1995. In 200 ...
and noted the potential difficulty in valuing such instruments.[ In October 2010, Ellington Financial LLC went public, debuting on the NYSE. , Vranos owned (directly or indirectly) over 2.5 million shares. According to its public filings, Ellington Financial invests primarily in non-agency mortgage-backed securities, but also holds agency pools and other mortgage-related securities, and had a total return of 59% between its August 2007 inception and the end of 2011.
Ellington Residential Mortgage REIT, chaired and founded by Vranos, went public on the NYSE after its IPO in late 2013, trading under the ticker symbol EARN.
]
Personal
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
Arm wrestling (also spelled armwrestling) is a sport with two opponents who face each other with their bent elbows placed on a table and hands firmly gripped, who then attempt to force the opponent's hand down to the table top ("pin" them). The s ...
challenges.[ Vranos currently lives in ]Greenwich, Connecticut
Greenwich (, ) is a New England town, town in southwestern Fairfield County, Connecticut, United States. At the 2020 United States Census, 2020 census, the town had a total population of 63,518. The largest town on Connecticut's Gold Coast (Conne ...
. In 2001, Slate.com
''Slate'' is an online magazine that covers current affairs, politics, and culture in the United States. It was created in 1996 by former '' New Republic'' editor Michael Kinsley, initially under the ownership of Microsoft as part of MSN. In 20 ...
finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
columnist
A columnist is a person who writes for publication in a series, creating an article that usually offers commentary and opinions. Column (newspaper), Columns appear in newspapers, magazines and other publications, including blogs. They take the fo ...
Rob Walker and alternative cartoonist
A cartoonist is a visual artist who specializes in both drawing and writing cartoons (individual images) or comics (sequential images). Cartoonists differ from comics writers or comic book illustrators in that they produce both the literary and ...
Josh Neufeld
Josh Neufeld (born August 9, 1967) 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 Gladsto ...
featured Vranos in their comic book
A comic book, also called comicbook, comic magazine or (in the United Kingdom and Ireland) simply comic, is a publication that consists of comics art in the form of sequential juxtaposed panels that represent individual scenes. Panels are of ...
, ''Titans of Finance'' (Alternative Comics
Alternative comics cover a range of American comics that have appeared since the 1980s, following the underground comix movement of the late 1960s and early 1970s. Alternative comics present an alternative to mainstream superhero comics which ...
, 2001, ). Vranos supported both Christopher Dodd
Christopher John Dodd (born May 27, 1944) is an American lobbyist, lawyer, and Democratic Party politician who served as a United States senator from Connecticut from 1981 to 2011. Dodd is the longest-serving senator in Connecticut's history. ...
and Barack Obama
Barack Hussein Obama II ( ; born August 4, 1961) is an American politician who served as the 44th president of the United States from 2009 to 2017. A member of the Democratic Party, Obama was the first African-American president of the U ...
on the Democratic side and Rudy Giuliani
Rudolph William Louis Giuliani (, ; born May 28, 1944) is an American politician and lawyer who served as the 107th Mayor of New York City from 1994 to 2001. He previously served as the United States Associate Attorney General from 1981 to 198 ...
on the Republican
Republican can refer to:
Political ideology
* An advocate of a republic, a type of government that is not a monarchy or dictatorship, and is usually associated with the rule of law.
** Republicanism, the ideology in support of republics or agains ...
side of the 2008 Presidential Election.
Philanthropy
Michael Vranos is a director of Hedge Funds Care, Boys & Girls Harbor, the Waterside School in Stamford, and Hopkins school in New Haven. He is a contributor to and former director of Stamford Shelter for the Homeless and the East Harlem School.[ Hedge Funds Care presented Vranos with its Lifetime Award for Caring in 2007.] He also established the Michael and Anna Vranos Graduate Fellowship Fund in the Life Sciences, the Vranos Family Junior Faculty Development Fund for Stem Cell and Regenerative Biology, and the Vranos Family Graduate Research Fellowship in Developmental and Regenerative Biology, all at Harvard University. According to Harvard Alumni, "He has also offered his time and support to Harvard as a member of the FAS Task Force on Balanced Philanthropy, as chair of the Class of 1983 Gift Committee, as af member of the New York Major Gifts Committee, and as chair of the Class of 1983’s 20th and 25th reunions."
References
{{DEFAULTSORT:Vranos, Mike
Living people
American bodybuilders
American financiers
American hedge fund managers
American investors
American money managers
American philanthropists
American stock traders
American people of Greek descent
Harvard College alumni
Stock and commodity market managers
Year of birth missing (living people)
Businesspeople from Worcester, Massachusetts
People from Weston, Connecticut
People from Ellington, Connecticut