Michael Vranos
About Michael Vranos
Michael W. Vranos, age 63, serves as Portfolio Manager and Trustee at Ellington Credit Company (EARN), and has been on the board since the Fund’s inception in September 2012 . He previously served as Co‑Chief Investment Officer of the Fund from October 2012 until April 2025 and is CEO and President of the Adviser, Ellington Credit Company Management LLC; he is also Founder and CEO of Ellington Management Group (EMG) since December 1994 and Co‑Chief Investment Officer of Ellington Financial Inc. since June 2009 . He graduated magna cum laude, Phi Beta Kappa with a B.A. in Mathematics from Harvard University . EARN completed a strategic transformation from an Agency RMBS REIT to a CLO-focused registered closed-end fund; management fees (base and performance) under the Investment Advisory Agreement are the primary economic linkages to Vranos via his ownership interests in EMG and the Adviser, rather than direct cash compensation from the Fund .
Past Roles
| Organization | Role | Dates | Strategic Impact |
|---|---|---|---|
| Ellington Credit Company (EARN) | Portfolio Manager & Trustee | Trustee since Sep 2012; Portfolio Adviser since Apr 2025; Co‑CIO Oct 2012–Apr 2025 | Portfolio oversight and risk/governance participation via EMG Investment and Risk Management Committee |
| Ellington Credit Company (Adviser) | CEO & President | Since Oct 2012 | Leads advisory services under Investment Advisory Agreement (fee alignment and investment decisions) |
| Ellington Management Group (EMG) | Founder & CEO | Since Dec 1994 | Provides personnel/services to Adviser and Administrator; common ownership creates related party economics |
| Ellington Financial Inc. (EFC) | Co‑Chief Investment Officer | Since Jun 2009 | Senior credit investment leadership relevant to CLO strategy |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| Ellington Management Group (EMG) | Founder & CEO | Since Dec 1994 | EMG provides services to EARN’s Adviser/Administrator; fees accrue to EMG owners |
| Ellington Financial Inc. (NYSE: EFC) | Co‑Chief Investment Officer | Since Jun 2009 | Public markets experience in structured credit |
Fixed Compensation
| Component | Amount | Notes |
|---|---|---|
| Director Fees at EARN | $0 | Interested Trustees (incl. Vranos) do not receive board compensation |
| Cash Compensation from EARN | None | Executives are employed by EMG; Fund pays no direct cash comp to executives |
| Advisory Economics | Base fee: 1.50% per annum on NAV; Performance fee as below | Compensation alignment flows through Adviser/EMG ownership rather than Fund payroll |
Performance Compensation
| Metric | Hurdle | Payout | Catch-up | Basis | Period/Status |
|---|---|---|---|---|---|
| Pre‑Performance Fee Net Investment Income | 8.00% per annum on Net Asset Value of Common Equity (2.00% per quarter) | 17.5% of Pre‑Performance Fee Net Investment Income above catch‑up | 100% of income above hurdle until total equals 121.21% of hurdle; then 17.5% thereafter | Excludes realized/unrealized gains/losses; calculated quarterly; no clawback; reduces hurdle when NAV declines | Performance fee waived through Q1 2025 (through January 2025) |
Key implication: Performance fees can be earned even when GAAP net loss occurs, and quarterly isolation plus NAV-of-common-equity hurdle can incentivize higher income risk-taking; Board acknowledges this structure versus peers .
Equity Ownership & Alignment
| Holder | Shares Beneficially Owned | % of Outstanding | Notes |
|---|---|---|---|
| Michael W. Vranos | 139,605 | <1% | Includes 106,472 shares held by EMG Holdings, L.P.; VC Investments L.L.C. and Vranos share voting/dispositive power over these shares |
| All execs and trustees (10 persons) | 510,442 | 1.4% | Group ownership as of April 10, 2025, based on 37,559,195 shares outstanding |
- Dollar range of Vranos’s Fund equity: $500,001–$1,000,000 .
- No pledging disclosed; no options/RSUs disclosed for Vranos; Independent trustee equity plans were terminated prior to the Conversion and 1940 Act restrictions prohibit future grants to trustees/officers .
- In December 2024, EMG Holdings held 1,000 super-voting Series A Preferred Shares; Vranos had sole voting/dispositive power but was contractually obligated to “mirror” common vote proportions, and all preferred shares were set to be redeemed upon approval or by the 2025 Annual Meeting record date .
Employment Terms
| Agreement | Key Term | Detail |
|---|---|---|
| Investment Advisory Agreement (effective Apr 1, 2025) | Base Management Fee | 1.50% per annum of Net Asset Value; payable quarterly in arrears |
| Investment Advisory Agreement | Performance Fee | Quarterly; 17.5% of Pre‑Performance Fee Net Investment Income above hurdle with catch‑up; hurdle 2% per quarter; waived through January 2025 |
| Investment Advisory Agreement | Term & Renewal | Initial 2‑year term; annual renewals per 1940 Act by Board or majority of outstanding voting securities and majority of Independent Trustees |
| Investment Advisory Agreement | Termination | 60‑day notice by Manager/Board/shareholders; automatic termination upon assignment; no termination fee |
| Administration Agreement | Scope & Fees | Office/admin services; Fund reimburses allocable overhead (CFO/COO/support staff, compliance); outsources at cost, no profit |
| Services Agreement (Adviser/Admin ↔ EMG) | Common control | EMG provides personnel/services; fees to Adviser/Admin/EMG accrue to common owners EMG Holdings, L.P. and VC Investments L.L.C. |
| Executive employment with Fund | None | Executives are EMG employees; Fund does not pay or reimburse executive compensation (except allocable admin reimbursement post‑Conversion) |
Board Governance
- Role: Interested Trustee (non‑independent); serves until the next annual meeting; has been a Trustee since Fund inception .
- Committee roles: Committees (Audit; Nominating and Corporate Governance) are composed solely of Independent Trustees; Vranos is not listed on these committees .
- Independence: Four of six trustees are Independent Trustees per 1940 Act standards; Vranos is an Interested Trustee .
- Leadership: Chairman is an Independent Trustee (Robert B. Allardice III); CEO and Chair roles are separated; rationale is focus and oversight .
- Attendance: 17 Board meetings in 2024; each trustee attended at least 75% of Board and committee meetings; Vranos attended the 2024 Annual and Special Meetings .
- Executive sessions: Independent Trustees met in executive session seven times in 2024 without management .
- Director compensation: Interested Trustees receive no Board compensation .
Related Party Transactions and Conflicts
- Adviser, Administrator, and EMG are under common ownership/control; advisory and admin fees accrue to EMG’s owners (including entities controlled by Vranos), representing ongoing related party economics .
- Post‑Conversion, the Fund is subject to 1940 Act restrictions that prohibit certain principal/joint transactions with affiliates absent exemptive relief .
- Performance fee mechanics can create incentives for higher income generation regardless of realized/unrealized losses; Board disclosed potential conflicts in accounting determinations impacting fees .
Risk Indicators & Red Flags
- Super‑voting Preferred Shares were issued to amplify the effect of common shareholder votes at a January 2025 special meeting; while votes were mirrored and shares redeemed upon approval, the issuance itself is a governance complexity investors should note .
- Performance fee can be earned in quarters with GAAP net losses; quarterly isolation, no clawback, and hurdle tied to NAV of common equity increase sensitivity to income accounting and risk posture .
Compensation Structure Analysis
- Shift from Fund‑paid equity grants to 1940 Act‑constrained governance: Trustee equity plan terminated; future grants to trustees/officers prohibited under 1940 Act, reducing insider selling pressure linked to equity vesting .
- Advisory fee benchmarking: Base fee on NAV (not gross assets) and 17.5% performance fee with an 8% annual hurdle were assessed by the Board as fair vs CLO closed‑end fund peers; termination fees eliminated under the new structure .
Equity Ownership & Alignment Details
| Date | Shares Outstanding | Vranos Shares | Ownership % | EMG Holdings L.P. Included |
|---|---|---|---|---|
| Apr 10, 2025 | 37,559,195 | 139,605 | <1% | 106,472 shares; joint control via VC Investments L.L.C. and Vranos |
Employment Terms (Severance/Change‑of‑Control) Summary
| Provision | Term |
|---|---|
| Severance / Termination Fees (Advisory Agreement) | None; termination upon assignment; 60‑day termination by Board/shareholders/Manager |
| Prior Management Agreement Termination Fee | Previously 5% of NAV on certain non‑renewals/terminations; Adviser agreed no termination fee upon Conversion |
| Clawbacks | None for performance fees; no accumulation of hurdle; fees not clawed back if subsequent quarters miss hurdle |
Investment Implications
- Alignment: Vranos’s economic exposure is through EMG/Adviser ownership; the advisory fee base on NAV and performance fee tied to pre‑fee net investment income creates leverage to Fund income generation rather than GAAP net income or TSR, which may not perfectly align with total shareholder return during volatile quarters .
- Retention risk: Low; multi‑decade founder/CEO of EMG and long‑tenured portfolio lead at EARN/EFC suggest continuity of strategy and personnel .
- Trading signals: Absence of ongoing insider equity awards and prohibition on future grants to trustees/officers reduces forced selling from vesting; monitor quarterly performance fee accruals as they can signal risk posture and income timing .
- Governance: Independent committees, separated Chair/CEO roles, and 1940 Act protections mitigate independence concerns, though related party economics remain via common control; the 2024–2025 preferred share issuance was procedurally shareholder‑friendly via mirrored voting but indicates willingness to use structural mechanisms to secure approvals .
Overall: Compensation is predominantly tied to advisory economics (base fee on NAV and performance fee on income), not Fund payroll. Investors should track quarterly Pre‑Performance Fee Net Investment Income and NAV of common equity trends, fee waivers expiry, and any adjustments under the 1940 Act constraints to assess pay‑for‑performance alignment and potential incentives .