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American Capital, Ltd. Message Board

  • engie095 engie095 Mar 21, 2012 5:20 PM Flag

    To consider - ACAS investing in AGNC/MTGE

    Here's an idea/question to consider:

    Why isn't ACAS purchasing shares of AGNC (or MTGE)? Unless there's a legal restriction I don't know about, the most simple answer is that ACAS sees investments that are more attractive. If that's the case, why should some one invest in AGNC rather than ACAS? Over the long haul, wouldn't the return from ACAS be expected to be bigger than things it deems less attractive to invest in?


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    • They get a much better return by buying their own stock. It is a no brainer for them.

    • There is risk involved with mortgage securities. Where as the fees represents zero risk. There are rules as to what kind of assets and the quantity of risk a publicly traded BDC can hold. I do not know the exact guide lines but to maintain certain registrations there are parameters that protect the shareholders by either limiting and/or eliminating various types of risk.

    • yourbestfriendintheworld yourbestfriendintheworld Mar 21, 2012 6:51 PM Flag

      They already get paid plenty from AGNC, and own a goodly chunk of MTGE. Actively trading them might set up conflicts of interest and suspicion of manipulation, where just holding what they already have looks like synergy of interest. It was speculated when MTGE was first floated that they were somewhat miffed at not having kept a piece of AGNC, given how well it performed once they found the right setting on the flux capacitor. Now they know what they're doing, and MTGE is paying them well.

      Or maybe they're going to reserve a slice of either of them for their own purchase in the next SPO. You never know.

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