Mike Vranos

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Michael Vranos

Residence Weston, Connecticut
Other names Mike
Education B.A. in mathematics Harvard University, 1983 magna cum laude
Occupation Hedge fund manager, founder; bond trader
Employers Kidder Peabody, Ellington Management Group
Title founder, CEO

Michael W. "Mike" Vranos is an American hedge fund founder and manager who in the 1990s was referred to by some as the "most powerful man on Wall Street."[1] In 1993, he reportedly earned $15 million from trading mortgage bonds.[2] Fortune Magazine once called him "one of the best bond traders on Wall Street."[3] At the end of 2007 he continued to be regarded as "the best-known mortgage-bond trader on Wall Street" according to the Wall Street Journal.[4]

He is remembered for heading collateralized mortgage obligation (CMO) trading in the early 1990s at Kidder Peabody at a time when they dominated the marketplace.[3] The firm was caught up in a bear market that crippled the firm causing top management to be jettisoned.[5] He left to start his own firm, Ellington Management Group in late 1994.[3] Ellington was troubled by the Long-Term Capital Management scandal.[6] The firm has survived with Vranos as its leader. Vranos continues to market various fund offerings to the public.[7]

Contents

[edit] Youth

Vranos was raised in Ellington, Connecticut, United States. In his youth, he worked as a bouncer and earned the title of Mr. Teen Connecticut as a bodybuilder.[8] 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.[3]

[edit] 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.[3] During his reign at Kidder Peabody from 1990–1994, Kidder underwrote over $200 billion in CMOs, which was about 20% of all CMOs and nearly double the next largest Wall Street firm.[3] Vranos was noted for having turned his collateralized mortgage obligation trading role into a money-making machine.[9] In 1991, Vranos was named Kidder Peabody’s Man of the Year, and in 1994, he continued to be highly regarded by Jack Welch, chairman of Kidder Peabody’s parent company, General Electric even though they were in the midst of a bear market.[3]

First, Michael Carpenter, the CEO of Kidder from 1989 to 1994 was forced to resign in July 1994.[5] 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.[10] Much of the media attention for the scandal was focussed on Joseph Jett.[5] The market became so severe that Vranos left to start his own firm in December 1994 and Kidder sold itself off to Paine Webber.[2]

[edit] Ellington Management Group

In December 1994, Vranos founded Ellington Management Group, which grew into a $21 billion dollar company.[3] Ellington became embroiled in the Long-Term Capital Management scandal in 1998.[2] The firm had to issue a public statement describing its borrowings to quell public fears, which was quite unusual for hedge funds at the time.[6] It clarified that although it was meeting margin calls by unloading hundreds of millions of dollars in assets over a two day period, losses were limited.[11] Some reports state that his hedge fund lost 25% of its value as he liquidated $2 billion in assets.[7]

At times Ellington has not agreed with other market participants on valuation in ways that have precluded deals from getting done. In 2000, Ellington bid unsuccessfully on Laser Mortgage Management Inc., a mortgage real estate investment trust that was considering closing.[12] In 2003, Ellington had a disagreement with Bank of America Securities on the valuation of Beacon Hill.[13]

In October 2007 his fund was again caught by the markets when it fell 22%, while its competitor hedge funds rose about 10%.[4] Ellington suspended redemptions.[14] 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 obligations[7] In June 2007, Vranos attempted to performed a private placement of a new entity, Ellington Financial LLC, to institutional investors.[7] The company aimed to specialize in subprime mortgages, and the offering statement was dated for July 12, 2007. The goal was a $750 million offering underwriten by Friedman Billings Ramsey.[7] The market only allowed him to raise $250 million.[4] Some question whether the new unit was a way for Vranos to unload subprime assets held elsewhere at favorable prices because Vranos had purchased some of the riskiest tranches from bankrupt subprime lender New Century Financial Corporation.[7]

[edit] Personal

Vranos currently lives in Weston, Connecticut. In 2001, he was caricatured in Titans of Finance (Alternative Comics, 2001, ISBN 1891867059)[15] by R. Walker and Josh Neufeld.[16] The comic book is a collaboration between a cartoonist and a finance columnist for Slate.com, which casts wall street executives and traders as heros and villains. The leading man was Ronald O. Perelman and Al Dunlap was among those included.[16]

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.[17]

Vranos is known for breaking up business meetings to issue armwrestling challenges.[5] At Harvard he was once known as "Mike the Arm".[18]

[edit] Notes

  1. ^ Seremet, Patricia (2004-02-17). Lea's Valentine Ball, A Living Love Letter For Leukemia Research. The Hartford Courant. Lea's Foundation. Retrieved on 2007-12-10.
  2. ^ a b c Reed Abelson (1998-10-13). THE MARKETS: Market Place; Still Another Hedge Fund Seems to Be in Financial Peril. The New York Times Company. Retrieved on 2007-12-09.
  3. ^ a b c d e f g h Ellington: An Experienced and Successful Team. Ellington Management Group, L.L.C.. Retrieved on 2007-12-09.
  4. ^ a b c Zuckerman, Gregory (2007-12-06). Vranos May Try to Reopen Ellington Credit Fund. The Wall Street Journal Online. Dow Jones & Company, Inc.. Retrieved on 2007-12-09.
  5. ^ a b c d Pare, Terence P. (1994-09-05). JACK WELCH'S NIGHTMARE ON WALL STREET The Welch legacy will be scarred by the management fiasco at Kidder Peabody. Here is General Electric's brutal lesson in how not to run a business.. Fortune Magazine. Cable News Network. Retrieved on 2007-12-10.
  6. ^ a b Abelson, Reed (1998-10-18). INVESTING: DIARY; Pssst. . .We Have No Problems At This Hedge Fund. Really.. The New York Times Company. Retrieved on 2007-12-09.
  7. ^ a b c d e f Morgenson, Gretchen (2007-07-22). Mr. Vranos Has a Deal for You. The New York Times Company. Retrieved on 2007-12-10.
  8. ^ Neufeld, Josh and R. Walker (2000-03-04). Titans of Finance: The V-Man (fram 2). TheStreet.com. Retrieved on 2007-12-09.
  9. ^ Nasar, Sylvia with Douglas Frantz (1994-06-05). Derailment On Wall Street -- A special report.; Fallen Bond Trader Sees Himself As an Outsider and a Scapegoat (page 4). The New York Times Company. Retrieved on 2007-12-09.
  10. ^ Nasar, Sylvia (1994-07-23). Kidder's No. 2 Executive Quits (page 2). The New York Times Company. Retrieved on 2007-12-09.
  11. ^ Hedge Fund Firm Says It Covered Its Losses. The New York Times Company (1998-10-18). Retrieved on 2007-12-09.
  12. ^ REIT Considers Closing. The New York Times Company (2000-10-06). Retrieved on 2007-12-10.
  13. ^ BofA, Hedge Fund At Odds Over Beacon Hill CBOs. Institutional Investor Platinum. InstitutionalInvestor.com (2003-05-05). Retrieved on 2007-12-10.
  14. ^ Pulliam, Susan, Randall Smith and Michael Siconolfi (2007-10-12). U.S. Investors Face An Age of Murky Pricing. The Wall Street Journal Online. Dow Jones & Company, Inc.. Retrieved on 2007-12-10.
  15. ^ Titans of Finance: True Tales of Money & Business. Amazon.com, Inc. (2007). Retrieved on 2007-12-10.
  16. ^ a b McGeehan, Patrick (2001-06-03). Private Sector; Dumbed Down on Wall St.: Junk Finance, With Pictures. The New York Times Company. Retrieved on 2007-12-10.
  17. ^ The Huffington Post's Fundrace2008. HuffingtonPost.com, Inc.. Retrieved on 2007-12-10.
  18. ^ Neufeld, Josh and R. Walker (2000-03-04). Titans of Finance: The V-Man (frame 3). TheStreet.com. Retrieved on 2007-12-09.
Persondata
NAME Michael Vranos
ALTERNATIVE NAMES Mike, The V-Man
SHORT DESCRIPTION Bond Trader, Hedge fund Manager
DATE OF BIRTH
PLACE OF BIRTH
DATE OF DEATH
PLACE OF DEATH