Desmond Macauley
About Desmond Macauley
Desmond E. Macauley is Co-Chief Investment Officer and Head of Risk Management at ARMOUR Residential REIT (ARR), appointed effective March 18, 2024, after serving as Director of Investment Strategies since May 2013 . He is 56 and holds an MBA from Wharton, an M.S. in Electrical Engineering from Georgia Tech, a B.S. magna cum laude in Electrical Engineering from NJIT, and is a CFA charterholder; prior roles include Managing Director, MBS Strategy at RBS Greenwich Capital and Vice President, MBS Research at Merrill Lynch . Company pay-versus-performance disclosures show volatile shareholder outcomes across recent years; 2024 Total Shareholder Return (TSR) was 44.11 (on a $100 base), with Total Economic Return of -2.6% and net loss of $14.4 million, framing the alignment lens for any equity awards and insider activity during his tenure as Co-CIO . Management commentary during his tenure emphasized tight risk management on leverage and hedging; for example, book value was ~$19.18 (Feb 10, 2025), leverage ~7.9x, and hedge mix ~25% treasuries/75% swaps in Q4’24, shifting near 30% treasuries/70% swaps in Q1’25 amid swap-spread dislocation .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| ARMOUR Residential REIT | Co-Chief Investment Officer & Head of Risk Management | Mar 18, 2024–present | Co-leads portfolio construction and hedging; diversified coupon stack, dynamic swap/treasury hedge mix in response to spread dislocations . |
| ARMOUR Residential REIT | Director of Investment Strategies | May 2013–Mar 2024 | Senior investment role shaping MBS strategy pre-promotion . |
| RBS Greenwich Capital | Managing Director, MBS Strategy | — | Recognized among top Structured MBS analysts; informs ARR’s research-driven approach . |
| Merrill Lynch | Vice President, MBS Research | — | Sell-side research foundation supporting risk and relative value insights . |
Fixed Compensation
ARR is externally managed; executives (including Macauley) are not Company employees. The Company paid no direct salary/bonus to NEOs in 2024 and paid management fees to its external manager, ARMOUR Capital Management LP (ACM) . The 2025 proxy explicitly notes Mr. Macauley did not receive Company compensation in 2024; any cash compensation would be via ACM and not disclosed by ARR .
| Component | Detail |
|---|---|
| Employment status | Not an employee of ARR; employed by external manager ACM . |
| Base salary (ARR) | Not paid by ARR (N/A) . |
| Target/Actual bonus (ARR) | Not paid by ARR (N/A) . |
| 2024 equity grants (ARR) | No 2024 executive grants other than reallocations to CFO; Macauley not a recipient . |
Performance Compensation
ARR’s equity for executives is primarily time-based restricted stock/phantom stock; the Company did not grant options in 2024 and historically has emphasized time-based vesting; performance-award capability exists in the Plan but no specific PSU metrics/weightings are disclosed for executives in 2024 .
| Incentive type | Metric | Weighting | Target | Actual | Payout | Vesting |
|---|---|---|---|---|---|---|
| Time-based equity (phantom stock/RSUs) | None (time-based) | N/A | N/A | N/A | N/A | Company program supports multi-year vesting; specific 2025 phantom award vesting for Macauley not disclosed in Form 4 . |
Notes:
- No stock options: Company did not grant options to executives in 2024 .
- Equity grant timing: Generally approved in Feb if granted; no 2024 executive grants beyond CFO reallocations .
Equity Ownership & Alignment
Policies and guidelines
- Ownership guideline: Co-CIO target beneficial ownership basis of $750,000 within five years; CEO $2,000,000; CFO $1,000,000 .
- Hedging/pledging: Prohibited for officers/directors; no pledged shares reported; all in compliance as of proxy date .
- Clawback: NYSE/SEC-compliant clawback adopted Oct 2023; applies to incentive compensation for three completed fiscal years prior to any restatement, regardless of fault .
- Insider trading policy: In effect and referenced in 2024 10-K exhibit .
Recent insider activity for Macauley (trading signals, vesting/tax events)
| Date | Type | Instrument/Shares | Price | Resulting action/details | Source |
|---|---|---|---|---|---|
| May 30, 2024 (trade date) | Open-market purchase | +1,000 common shares | $19.02 | Initial direct stake reported as 1,000 shares | (links to SEC XML: http://www.sec.gov/Archives/edgar/data/1428205/000142820524000129/xslF345X03/wk-form4_1717100847.xml) |
| Apr 28, 2025 (grant date) | Award | 30,000 phantom shares | — | Grant under ARR’s Third Amended & Restated 2009 Equity Incentive Plan (vesting terms not stated in Form 4) | |
| Aug 21, 2025 (reported Aug 22) | Conversion & tax withholding | 1,124 phantom units converted into 1,124 shares; 376 units withheld for taxes | $14.81 (withholding ref.) | Net share issuance indicates vesting event; remaining units used to satisfy taxes | SEC Form 4 XML ; summary |
Lock-up during 2025 equity offering
- Macauley was a named lock-up party in ARR’s August 2025 underwritten common offering (45-day lock-up from the final prospectus date), restricting sales/hedges, with standard exceptions (e.g., tax withholding on vesting) .
Employment Terms
| Term | Disclosure |
|---|---|
| Appointment | Co-CIO and Head of Risk Management effective March 18, 2024 . |
| Employment form | Externally managed structure; executives are employed by ACM; not employees of ARR . |
| Officer status | Executive officers serve at the discretion of the Board . |
| Severance | No individual ARR employment/severance agreement disclosed for Macauley (comp flows through ACM) . |
| Change-in-control (CIC) equity | Plan provides for potential acceleration/assumption/termination of awards upon CIC or termination of the Management Agreement without Cause; 2023/2021 grants to executives vest on CIC per Plan; specific CIC table presented for NEOs (Ulm, Zimmer, Harper) as of 12/31/24; Macauley not included as NEO in 2024 . |
| Clawback | Company clawback policy adopted Oct 2023, aligned with NYSE Section 303A.14; recovery regardless of fault . |
| Hedging/pledging | Prohibited for officers/directors . |
Performance & Track Record
Company performance markers (context for incentive alignment)
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Total Shareholder Return (value of $100) | 66.74 | 67.53 | 46.06 | 38.98 | 44.11 |
| Net Income (loss), $ | (215,111,531) | 15,362,714 | (229,930,299) | (67,923,938) | (14,393,939) |
| Total Economic Return | (35.1%) | (6.4%) | (32.4%) | (4.7%) | (2.6%) |
Selected risk management commentary (Macauley)
- Hedge mix and swap-spread dislocation: “In Q1, we increased the share of our treasury-based hedges slightly from 25% to 30%… now roughly 70% of hedges in swaps… expect normalization in swap spreads… 30% treasury-based hedges help protect the portfolio.” .
- Portfolio duration/leverage and liquidity stance (Q4’24): Net duration ~0.36 years; implied leverage ~7.9x; “cash and box liquidity ~50% of total capital”; hedge book ~25% treasuries, remainder OIS/SOFR pay swaps .
- Coupon stack positioning and post-quarter actions (Q1’25): Bias toward production coupons (5.0%-5.5%), potential 5-year securities for convexity; sold some assets around Apr 2 risk event while maintaining spread exposure .
Compensation Committee & Say‑on‑Pay
- Compensation Committee: Independent directors Robert C. Hain (Chair), Z. Jamie Behar, Stewart J. Paperin; oversees officer comp payable by ARR (excludes ACM pay) and equity plans; no interlocks/insider participation disclosed .
- Say‑on‑Pay 2024: ~86% approval for ARR’s 2024 executive compensation program .
Related Party & Structural Considerations
- BUCKLER Securities (affiliated repo platform): ARR’s independent directors oversee a financing JV; BUCKLER handled ~$4.9B of repo with ~$5.7B posted collateral and ~$249M interest in 2024; ARR provides a subordinated loan commitment (up to $250M as of Feb 2025) to support BUCKLER’s regulatory capital; governance protections in place .
- Implication: Enhanced access to term repo can affect leverage capacity and dividend sustainability; also central to Macauley’s funding/hedging strategy oversight .
Investment Implications
- Alignment and potential selling pressure: Macauley’s 2025 phantom stock grant (30,000 units) and August 2025 vest/settle event (1,124 shares issued; 376 withheld for taxes) signal ongoing equity-based compensation and periodic tax-withholding sales, creating episodic selling flows; however, hedging and pledging prohibitions reduce misalignment/pledge risk .
- Retention risk: Long firm tenure (since 2013) and 2025 lock-up participation during a capital raise indicate engagement and commitment; ownership guideline of $750,000 for Co‑CIOs further anchors alignment over five years .
- Pay-for-performance lens: ARR’s compensation structure relies on time-based equity with no disclosed performance-weighted PSU metrics in 2024, which can lower pay sensitivity to TSR/earnings; that said, high-frequency market and funding risk management under Macauley (hedge mix, leverage discipline) are key drivers of book value and distributable earnings that ultimately shape equity value realization .
- Trading signals: A modest open-market buy in May 2024 (1,000 shares at $19.02) is a positive but small signal; repeated vesting events and tax withholdings (e.g., Aug 2025) are likely the dominant insider-flow drivers near vest dates (SEC XML link: http://www.sec.gov/Archives/edgar/data/1428205/000142820524000129/xslF345X03/wk-form4_1717100847.xml) .
Appendix: Key Policies and Plan Mechanics
- Equity Plan mechanics: Plan permits restricted stock/RSUs, options/SARs (not used in 2024), performance awards; committee discretion on vesting/acceleration; CIC can trigger acceleration/assumption/termination .
- Insider trading policy: In force; detailed in 10‑K exhibit .