Michael Vranos
About Michael Vranos
Michael W. Vranos is Co-Chief Investment Officer of Ellington Financial Inc. (EFC), founder and CEO of Ellington Management Group (EMG), and CEO/President of EFC’s external manager (Ellington Financial Management LLC). He is 63 and has served as EFC’s Co‑CIO since June 2009; he previously served as EFC’s Chairman from inception in 2007 until October 2009 and as a director until August 2018. He graduated magna cum laude, Phi Beta Kappa with a B.A. in Mathematics from Harvard University and earlier ran RMBS trading at Kidder Peabody before founding EMG in December 1994 . Company performance context during his tenure (select disclosures): 2024 net income of $148.1 million; 5‑year TSR (Dec-2019 base=100) at 119.53 vs Mortgage REIT peer index 79.96 as of 2024 .
| Performance Metrics | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| EFC TSR (Dec-2019 base=100) | 90.17 | 113.92 | 93.05 | 109.94 | 119.53 |
| FTSE NAREIT Mortgage REIT Index TSR (base=100) | 81.38 | 94.05 | 69.27 | 79.79 | 79.96 |
| Net Income (loss) $k | 28,377 | 140,556 | (70,869) | 87,898 | 148,104 |
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Ellington Financial Inc. | Chairman; Director | 2007–2009 (Chairman); 2007–2018 (Director) | Early governance and strategy-setting during company formation |
| Kidder Peabody | Senior Managing Director; ran RMBS trading | Until Dec 1994 | Built leading RMBS/structured products franchise prior to founding EMG |
External Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Ellington Management Group (EMG) | Founder & Chief Executive Officer | 1994–present | Firm-wide leadership; investment/risk culture foundational to EFC’s externally managed model |
| Ellington Financial Management LLC (EFC’s Manager) | Chief Executive Officer & President | Current | Oversees EFC’s day-to-day management under management agreement |
| Ellington Residential Mortgage REIT (EARN) | Portfolio Manager; Trustee | Current | Cross-platform investment leadership; information flow across Ellington complex |
Fixed Compensation
EFC is externally managed; EFC does not pay cash compensation to Mr. Vranos. He is an employee/partner of EMG and CEO of EFC’s Manager; his compensation is paid by EMG, funded by management and potential incentive fees that EFC pays the Manager -.
| Item | 2023 | 2024 | Notes |
|---|---|---|---|
| EFC cash paid to M. Vranos | — | — | EFC does not pay him; EMG pays him; EFC does not reimburse for Non‑Reimbursed NEOs |
| Base management fee (paid by EFC to Manager) | $20.4m | $23.5m | 1.50% per annum of Operating Partnership equity, paid quarterly |
| Incentive fee (paid by EFC to Manager) | $0 | $0 | 25% of Adjusted Net Income above hurdle; none incurred in 2023–2024 |
Additional CD&A disclosure: EFC estimates $6.4m of EMG’s total 2024 compensation for Non‑Reimbursed NEOs (which include Mr. Vranos) was reasonably associated with EFC’s management fees (27% of $23.5m), with ~3% fixed and ~97% variable; amounts are aggregate and not allocated to individuals .
Performance Compensation
Mr. Vranos’s direct EFC incentive pay is via the Manager’s incentive fee mechanics; EFC made no 2023–2024 incentive fee payments.
| Metric | Weighting | Target/Hurdle | Actual | Payout | Vesting/Form |
|---|---|---|---|---|---|
| Adjusted Net Income over Hurdle (rolling 4 quarters) | 100% (sole driver of fee) | Hurdle Amount = Stockholders’ Common Equity × Hurdle Rate; Hurdle Rate = greater of 9% or 3% + 10Y UST | 2023–2024 resulted in no incentive fee | 25% of excess when above hurdle; 0 paid for 2023–2024 | Paid in cash and shares (≥10% shares) when earned |
Notes: “Adjusted Net Income” excludes non‑cash equity comp and certain one‑time/non‑cash items subject to independent director approval; “Loss Carryforward” must be recovered before fees; no loss carryforward remained at 12/31/2024 .
Equity Ownership & Alignment
| Category | Detail |
|---|---|
| Total beneficial ownership | 3,357,349 Common Shares equivalent (includes OP LTIP Units and OP Units), 3.5% of outstanding |
| Sole vs shared control | Sole voting/dispositive: 1,981,511; Shared voting/dispositive: 1,375,838 (incl. 319,241 OP LTIP Units and 28,521 OP Units) |
| Through affiliates | VC (managed/controlled by Vranos) is managing member of EFM and GP of EMGH; shared power across EFM/EMGH/VC structures |
| Officers/directors/EMG affiliates ownership | ~4% of outstanding common equity as of 12/31/2024 (alignment signal) |
| Pledging/hedging | Policy prohibits short sales and derivative transactions designed to hedge EFC stock; no specific disclosure of share pledging by executives |
| Ownership guidelines | Not disclosed in proxy - |
Convertibility/liquidity mechanics for units: OP LTIP Units may convert to OP Units 1:1; OP Units redeemable for EFC Common Shares or cash at the Company’s election, subject to conditions -.
Employment Terms
- Employment and role: Mr. Vranos serves as EFC Co‑CIO; he is CEO/President of the Manager and founder/CEO of EMG; he is employed by EMG, not EFC .
- Management Agreement economics: Base fee 1.50% of Operating Partnership equity; incentive fee 25% of Adjusted Net Income above a 9% or (3% + 10Y UST) hurdle, with at least 10% of any incentive fee paid in EFC shares; no incentive fees incurred in 2023–2024 -.
- Severance/change‑in‑control: EFC generally has no obligations to NEOs upon termination or change in control; specific vesting and severance terms disclosed for CFO/CAO only (not applicable to Mr. Vranos) .
- Risk management/oversight: EMG’s Investment and Risk Management Committee (members include Mr. Vranos, Mr. Tecotzky, and Director/CEO Mr. Penn) advises EFC management on investment policies, portfolio, financing, and hedging; Audit Committee leads Board risk oversight .
- Clawback: EFC adopted a clawback policy effective Nov 2, 2023 for executive officers, requiring recoupment of incentive-based compensation following a financial restatement (post-Oct 2, 2023 awards) .
Related Party Transactions and Conflicts Controls
- Cross/principal transactions and investments in other EMG accounts are permitted subject to independent director pre‑approvals, market‑based pricing, and policy controls; fee rebates reduce EFC’s base/incentive fees where EMG earns additional fees on related investments .
- Administrative fees: In 2024, approx. $0.1m in administrative fees were paid to EMG/affiliates for certain transactions; as of Dec 31, 2024, none of Messrs. Vranos, Penn, or Tecotzky had a direct or indirect material interest in these fees .
Say‑on‑Pay and Shareholder Feedback
- 2024 say‑on‑pay support: ~86% approval; EFC conducts an annual advisory vote; note that EFC only compensates CFO/CAO directly, while other NEOs (including Mr. Vranos) are compensated by EMG .
Compensation Structure Analysis
- Cash vs equity mix: For Non‑Reimbursed NEOs (including Mr. Vranos), EMG’s aggregate 2024 comp tied to EFC’s management fees was predominantly variable (~97%) versus fixed (~3%), indicating pay is largely at‑risk and performance/discretion driven at EMG; amounts are aggregate, not individual .
- Shift to RSUs/options: No EFC‑granted RSUs or options are disclosed for Mr. Vranos; his equity exposure is primarily through beneficial ownership/affiliates and OP LTIP/OP Units held across entities .
- Guaranteed vs at‑risk: At the EFC level, incentive fee is strictly formulaic and at‑risk above a hurdle; zero incentive fee was paid in 2023–2024 despite higher base fees, shifting economics toward asset‑/equity‑based management fees rather than performance fees -.
- Performance metric rigor: Hurdle set at the greater of 9% or 3% + 10Y UST (rolling four-quarter test), a relatively robust benchmark for incentive fees; presence of loss carryforward (cleared by 12/31/2024) adds downside protection .
Vesting Schedules and Insider Selling Pressure
- Specific vesting schedules for Mr. Vranos’s personal LTIP awards are not disclosed in the proxy; for CFO/CAO, 2024 LTIP awards vest across 2025–2026 and pay regular dividends, illustrating typical OP LTIP vesting mechanics at EFC, but these are not attributable to Mr. Vranos -.
- Potential selling pressure: Mr. Vranos has 319,241 OP LTIP Units and 28,521 OP Units included in his shared beneficial ownership; OP Units are redeemable for shares or cash (company election). Actual selling/transactions require monitoring of Forms 4; not disclosed in the proxy -.
Equity Ownership & Alignment (Detailed Table)
| Item | Amount/Detail |
|---|---|
| Beneficial ownership | 3,357,349 shares (incl. 319,241 OP LTIP Units; 28,521 OP Units) |
| % of outstanding | 3.5% (based on 94,513,137 shares outstanding at 4/10/2025) |
| Sole voting/dispositive | 1,981,511 shares |
| Shared voting/dispositive | 1,375,838 shares (incl. unit holdings noted above) |
| Affiliated control entities | VC Investments LLC; EMG Holdings, L.P.; Ellington Financial Management LLC (relationships and control detailed) |
| Hedging/short‑sale policy | Prohibits short sales and derivative hedging of EFC securities by officers/directors/EMG personnel |
| Pledging | No pledging disclosure in the proxy |
| Officers/directors/EMG affiliates aggregate | ~4% of common equity as of 12/31/2024 |
Employment Terms (Manager Agreement Highlights)
| Feature | Term |
|---|---|
| Base fee | 1.50% per annum of Operating Partnership equity, quarterly in arrears |
| Incentive fee | 25% of Adjusted Net Income above Hurdle Amount over rolling four quarters |
| Hurdle rate | Greater of 9% or (3% + 10Y UST) per quarter basis; Hurdle adjusts for issuances/repurchases |
| Loss carryforward | Prior period losses offset until recovered; $22.1m at 12/31/2023; none at 12/31/2024 |
| Form of payment | At least 10% of any incentive fee in EFC common shares; remainder in cash |
| 2023–2024 incentive fee | $0 (none incurred) |
Investment Implications
- Alignment vs scale incentives: High personal stake (3.5% beneficial ownership) aligns Mr. Vranos with shareholders, but the external management structure’s base fee (1.50% of equity) rewards AUM/equity scale regardless of performance; upside performance alignment is tempered by the absence of incentive fees in 2023–2024, implying recent economics skew to base fees over outperformance -.
- Performance hurdle discipline: The robust hurdle (≥9% or 3% + 10Y UST) and loss carryforward design limit incentive payouts to strong multi‑quarter performance, which can be shareholder‑friendly; no incentive fees paid in 2023–2024 corroborates this discipline amid market conditions .
- Liquidity/overhang watch: Mr. Vranos’s shared beneficial holdings include OP LTIP and OP Units that are ultimately redeemable into stock/cash, creating potential conversion/supply dynamics; monitor future Form 4 activity for sell pressure signals around vesting/redemption windows (not disclosed in the proxy) -.
- Governance and conflicts: Related‑party transaction policies (independent approvals, market pricing) and specific disclosure that Messrs. Vranos/Penn/Tecotzky had no material interest in 2024 administrative fees mitigate some conflict risks, but cross/principal transactions and external management inherently warrant ongoing oversight .
- Shareholder sentiment: 86% say‑on‑pay support in 2024 (noting EFC only directly compensates CFO/CAO) suggests investor acceptance of the structure; continued transparency on fee outcomes and ownership alignment remains key .
References: EFC 2025 DEF 14A (Apr 18, 2025) - - -.