We intend to capitalize on market opportunities by utilizing an opportunistic strategy that will enable us to generate a sustainable earnings stream over a long-term horizon for our shareholders.
In April 2024, we announced a strategic transformation of our investment strategy to focus on corporate collateralized loan obligations (“CLOs”). We intend to complete our transition from an MBS-focused company to a CLO-focused company later this year.
We are now focusing on acquiring, investing in, and managing secondary CLO mezzanine debt and equity tranches.
Our primary objective is to generate attractive risk-adjusted total returns for our shareholders by making investments that we believe compensate us appropriately for the associated risks. Historically, we aimed to attain this objective by constructing and actively managing a portfolio consisting primarily of residential mortgage-backed securities for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity.
We now invest in multiple parts of the CLO capital structure, including mezzanine debt and equity tranches. We select investments for their ability to provide a strong total return to drive a sustainable earnings stream and book value growth over a long-term horizon, rather than focusing just on current yield. We also take a trading-oriented approach, which seeks to take advantage of pricing inefficiencies in the CLO market, as opposed to simply “buy-and-hold.”
We rely on strong risk management, including disciplined liquidity management and selective use of credit hedges, in order to preserve book value during times of stress. We also leverage Ellington’s proprietary technology, analytics and risk management systems to enhance underwriting and investment selection and to guide ongoing portfolio monitoring and surveillance.
Prior to our strategic transformation, announced in April 2024, we constructed and actively managed a hybrid investment portfolio, with a primary focus on Agency RMBS, and with secondary focuses on: (1) non-Agency RMBS, and (2) commencing in the third quarter of 2023, CLOs. We also opportunistically acquired and managed other mortgage- and real estate-related assets, such as MSRs, CRTs, CMBS, and residential whole mortgage loans that we held for appreciation and/or current income.