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?
I'm definitely for the buyback, and agree that it should have a better return, but do you think they're finding other investments with better expected returns than ~15-20% from investing in AGNC? Or are they not entering new investments?
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.
Business Development Company is not a full blown REIT, and this end the intent was to get small investors into the private equity lending to small company's that found it hard to either secure financing or partners for equity stakes.
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.