Mike Vranos
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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 s ...
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 bonds. '' Fortune Magazine'' 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 (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 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 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 ...
,
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. 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 year ...
degree in 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 high ...
in 1983 with both '' magna cum laude'' 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 ...
honors. He began pursuing a PhD in Mathematics, before beginning his work on Wall Street.


Kidder Peabody

Vranos started work at Kidder Peabody 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 ''
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'', while ''
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'' 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 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
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, chairman of Kidder Peabody’s parent company,
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, 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 t ...
.


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 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. 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).Le ...
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 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-linke ...
. The offering primarily targeted investments in non-agency mortgage-backed securities. The deal was underwritten 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 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) ...
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 debtor ...
subprime lender New Century Financial Corporation 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 challenges. Vranos currently lives in
Greenwich, Connecticut Greenwich (, ) is a town in southwestern Fairfield County, Connecticut, United States. At the 2020 census, the town had a total population of 63,518. The largest town on Connecticut's Gold Coast, Greenwich is home to many hedge funds and other ...
. 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 2 ...
finance columnist Rob Walker and alternative cartoonist Josh Neufeld 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'' (
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, 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 histor ...
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 ...
on the Democratic side and Rudy Giuliani on the
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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