A Sleeping Giant: Opportunity in Fannie Mae

Published on
June 17th, 2020
Duration
38 minutes

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49

A Sleeping Giant: Opportunity in Fannie Mae

The Interview ·
Featuring Whitney Tilson and Gabriella Heffesse

Published on: June 17th, 2020 • Duration: 38 minutes

We are now more than a decade past the GFC, and Fannie Mae is finally exiting conservatorship – a legal concept where a guardian oversees the finances of an individual or company. Whitney Tilson, founder and CEO of Empire Financial Research, and Gabriella Heffesse, chief operating officer of ACG Analytics, take a deep-dive into Fannie Mae, the mortgage giant that securitizes just under half of all mortgages in the United States. They analyze the investment opportunity Fannie Mae presents, comparing the junior preferred shares to the common tier equity, and the different risk/reward proposition each level of the capital stack offers. Tilson and Heffesse review the history of Fannie Mae, from its being placed into conservatorship to the "net worth sweep" to the ongoing attempts to implement a "recap and release" plan. In addition, this serves as a timely case study on the multi-year playbook for government bailouts and conservatorship for national champion companies that could once again show up in Washington with outstretched hands and empty pockets. Filmed on June 10, 2020.

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Transcript

Chapters

  1. 00:00:29
    An Overview of Fannie Mae
  2. 00:04:17
    The "Recap and Release" Plan
  3. 00:09:44
    Fannie Mae's Attempts to Raise Additional Capital
  4. 00:15:42
    Confidence Levels and Asset Allocation
  5. 00:20:38
    Risk/Reward of Capital Stack: Junior Preferred Stock vs. Common Stock
  6. 00:24:49
    Will Pending Legislation Hamper Recapitalization Efforts?
  7. 00:30:42
    Fannie Mae In the Current Political Climate
  8. 00:32:32
    Capital Rules and Guarantee Rates
  9. 00:34:59
    Thoughts on the Speculative Fervor in Hertz, Chesapeake, and Other Bankrupt Stocks

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Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

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