Annaly Capital Management Profile
Annaly Capital Management, Inc. operates as a leading diversified capital manager with investment strategies across mortgage finance.
The company finances its Agency mortgage-backed securities and residential credit investments primarily with repurchase agreements. The company seeks to diversify its exposure and limit concentrations by entering into repurchase agreements with multiple counterparties. The company enters into repurchase agreements with broker-dealers, commercial banks, and other lenders that typically offer this type of financing.
Additionally, the company’s wholly-owned subsidiary, Arcola Securities, Inc. (Arcola), provides direct access to third party funding as a member broker-dealer of the Financial Industry Regulatory Authority (FINRA). As an eligible institution, Arcola also raises funds through the General Collateral Finance Repo service offered by the Fixed Income Clearing Corporation (FICC), with FICC acting as the central counterparty. Arcola provides it greater depth and diversity of repurchase agreement funding while also limiting the company’s counterparty exposure.
The company also finances its investments in residential mortgage loans through the issuance of securitization transactions sponsored by its wholly-owned subsidiary Onslow Bay Financial LLC (Onslow Bay) under the Onslow Bay private-label securitization program (OBX). During the year ended December 31, 2023, the company issued 13 OBX securitizations backed by $4.9 billion of residential whole loans.
Strategy
Strategic Relationships
A key element of the company’s strategy is to establish and grow strategic relationships with industry leading partners in order to develop and broaden access to quality originations flow, as well as to leverage third party operations.
Investment Groups
The company’s three investment groups are primarily consisted of the following:
Annaly Agency Group: Invests in Agency mortgage-backed securities (MBS) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including Agency commercial MBS.
Annaly Residential Credit Group: Invests primarily in non-Agency residential whole loans and securitized products within the residential and commercial markets.
Annaly Mortgage Servicing Rights Group: Invests in mortgage servicing rights (MSR), which provide the right to service residential mortgage loans in exchange for a portion of the interest payments made on the loans.
Strategic Relationships
The company has created multiple strategic and capital partnerships across its investment groups including the following:
Annaly Residential Credit Group has established relationships with key mortgage loan originators and aggregators, including well-known money center banks, allowing it to efficiently source proprietary originations suited to its risk parameters.
The company has partnered with GIC Private Limited (GIC), a leading sovereign wealth fund, through the creation of a joint venture with the purpose of investing in residential credit assets, including newly-originated residential loans and securities issued by its subsidiaries.
The company has partnered with Capital Impact Partners, a national community development financial institution, to create a social impact joint venture supporting projects in underserved communities across the country.
The company has partnered with Fifth Wall Ventures, the largest venture capital firm focused on technology for the real estate industry, through a commitment to invest in their funds that target investments in North American early- and late-stage real estate software and marketplace companies. The partnership aims to identify innovative platforms and services that provide efficiencies across its core investment strategies.
Tax Status
The company is an internally-managed company that has elected to be taxed as a Real Estate Investment Trust (REIT) as defined under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder (the Code). So long as the company qualifies for taxation as a REIT, the company generally will not be subject to the U.S. federal income tax on its taxable income that is distributed to its stockholders. Furthermore, substantially all of the company’s assets, other than its taxable REIT subsidiaries (TRSs), consists of qualified REIT real estate assets (of the type described in Section 856(c)(5) of the Code).
Regulation
The company regularly monitors its investments and the income from these investments, and to the extent the company enters into hedging transactions, it monitors income from its hedging transactions as well, so as to ensure at all times that the company maintains its qualification as a REIT and its exemption from registration under the Investment Company Act and its exemption from registration as a commodity pool operator (CPO) with the U.S. Commodity Futures Trading Commission (CFTC).
Arcola is a member of FINRA and is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees. As a self-clearing, registered broker dealer, Arcola is required to maintain minimum net capital by FINRA. Arcola consistently operates with capital in excess of its regulatory capital requirements as defined by SEC Rule 15c3-1.
The company has a subsidiary that is registered with the SEC as an investment adviser under the Investment Advisers Act. As a result, the company is subject to the anti-fraud provisions of the Investment Advisers Act and to fiduciary duties derived from these provisions that apply to its relationships with that subsidiary’s clients. The company’s registered investment adviser subsidiary is subject to periodic SEC examinations and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients.
The company also has a subsidiary that operates as a licensed mortgage aggregator and master servicer, which compels it to follow individual state licensing laws and subjects it to supervision and examination by federal authorities, including the Consumer Financial Protection Bureau’s (CFPB), the U.S. Department of Housing and Urban Development (HUD), the Securities and Exchange Commission (SEC), as well as various state licensing, supervisory and administrative agencies. The company and its subsidiaries must also comply with a large number of federal, state and local consumer protection laws, including among others, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act, Real Estate Settlement Procedures Act, the Truth in Lending Act, and the Fair Credit Reporting Act, as well as state foreclosure laws and federal and local bankruptcy rules.
History
Annaly Capital Management, Inc., a Maryland corporation, was founded in 1996. The company was incorporated in 1996.
