Investment Strategies

We manage funds and accounts in five broad strategic areas.

Diversified Credit Strategies

Ellington’s diversified credit strategies seek to generate attractive returns through disciplined asset selection and hedging in a broad range of sectors, comprising residential mortgages, commercial mortgages, consumer debt, and corporate debt / leveraged loans, expressed through a combination of securitized and unsecuritized loans, as well as cash and synthetic corporate credit in both U.S. and European markets.

We rely on our deep expertise, proprietary models and research, and extensive trading relationships to implement relative value investment strategies. Our objective is to capture a stable income stream while mitigating return volatility over time, with our core positions outperforming their associated hedges through excess cash flow and/or superior price performance.

We seek to generate additional alpha by providing liquidity to the market and investing in sectors requiring highly specialized capabilities. Ellington’s approach to portfolio management emphasizes active trading within and between sectors.

Systematic Credit Strategies

Ellington focuses on high turnover, long-short credit strategies designed to take advantage of short-term flow-driven inefficiencies in credit markets. Balanced portfolio construction and hedges within the same capital structure protect against idiosyncratic and market downside. Ellington acts as a marginal liquidity provider, effectively transferring risk from individual cash corporate bonds to single-name CDS and related equities. Returns are generated through active trading of positions, frequently capturing small dislocations across issuers.

Over the past decade, Ellington has made significant investment in infrastructure and technology to support an active research agenda that drives ongoing strategy innovation and evolution. Our multidisciplinary, collaborative team includes professionals with complementary backgrounds in research, development and trading. We use advanced techniques from data sciences and machine learning to support our research efforts.

Mortgage Prepayment Relative Value Strategies

Ellington's MBS prepayment trading strategy has been a core strategy throughout the firm’s history. The founding partners’ expertise in mortgage derivatives and agency pools dates back to the early 1980s. The strategy employs time-tested, agent-based analytics to select attractive agency and non-agency mortgage derivatives, as well as agency pools with favorable prepayment characteristics.

The CMO and MBS derivatives markets were developed to disaggregate and reallocate risks inherent in MBS. The dearth of traditional buyers for MBS derivatives presents a persistent structural opportunity for those who understand these risks. Holding periods are typically relatively long, though the strategy also engages in opportunistic trading and sector rotation.

Traditional Mandate Solutions

Ellington offers traditional mandate solutions, including long-only, lower risk, and index-based products for select institutional clients. Our experience navigating the rich and varied opportunity set in fixed income allows us to add value through disciplined risk management, sector selection, and opportunistic trading, rather than through directional macroeconomic positions.

In addition, our proprietary portfolio management systems offer time-tested support for mandate-specific investment requirements, ranging from implementation of index- and duration-tracking strategies, to compliance with legal, regulatory, and tax constraints such as ERISA and UBTI. Ellington’s traditional mandate solutions benefit from access to the same portfolio managers, proprietary models, and market insights that guide our hedge fund strategies.

Bank Advisory Solutions

Ellington Portfolio Solutions (EPS) offers advisory services to depository institutions, partnering with banks to construct and optimize their securities portfolios based on the specific risk metrics of each institution. EPS collaborates with clients to determine risk profiles, asset allocation, security selection and trade execution, tailoring portfolios to the client’s specific needs, from duration and convexity management to liquidity and risk-based capital requirements. These clients benefit from access to the same portfolio managers, proprietary models, and market insights that guide Ellington’s other strategies.