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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
Annaly Capital Management, Inc. aims to generate durable, high-quality risk-adjusted returns by dynamically deploying capital across a diversified housing finance platform comprised of Agency mortgage-backed securities (MBS), Residential Credit, and Mortgage Servicing Rights (MSR). During the first quarter of 2026, the company achieved its tenth consecutive quarter of positive economic returns, with earnings available for distribution (EAD) of $0.76 per share outperforming its declared dividend of $0.70 per share. This strong performance was driven by strategic capital reallocation toward its Residential Credit and MSR portfolios to capture attractive relative market value. The Residential Credit portfolio expanded by 30% quarter-over-quarter, propelled by record whole loan lock and funding volumes within the correspondent channel. Meanwhile, the MSR portfolio grew 9% due to robust bulk and flow purchase activities. Despite rising geopolitical uncertainty in the Middle East and inflationary headwinds that may keep the Federal Reserve on hold, fixed-income technicals remain highly favorable. Annaly continues to maintain a disciplined risk posture, balancing its portfolio with robust hedging and prudently managed economic leverage of 5.7x.
Dynamically deploying capital across a diversified housing finance platform to maximize risk-adjusted returns and deliver durable dividend yield throughout varying market cycles.
The manager expects US economic resilience to continue, supported by consumer spending and business investments, though inflation is likely to rise in the near term due to energy costs. The Federal Reserve is projected to keep policy rates on hold for the remainder of 2026. Non-Agency issuance is expected to reach a post-crisis record of approximately $250+ billion, and MSR supply is anticipated to remain healthy throughout the year due to industry consolidation.
As of Mar 31, 2026
David L. Finkelstein serves as CEO and Co-Chief Investment Officer, bringing over 25 years of experience in fixed income investments. He previously served as an Officer in the Markets Group of the Federal Reserve Bank of New York, where he was the primary strategist and policy adviser for the MBS Purchase Program. Before joining Annaly in 2013, he held senior agency MBS trading positions at Salomon Smith Barney, Citigroup Inc., and Barclays PLC. He is a member of the Treasury Market Practices Group sponsored by the Federal Reserve Bank of New York and holds the Chartered Financial Analyst designation.
High Conviction Bullish
Market Conviction
The manager displays high conviction through clear, quantified asset allocations (56% Agency, 23% Residential Credit, 21% MSR) and record securitization activity totaling $6.6 billion year-to-date.
Growth Outlook
The manager remains positive on housing credit fundamentals and fixed income technicals but maintains caution regarding geopolitical risks and persistent inflation.
Risk Appetite
The firm increased leverage marginally to 5.7x and expanded capacity in Residential Credit and MSR businesses, indicating a healthy risk appetite within a disciplined hedging framework.
Capital Deployment
Annaly actively deployed capital in Q1 2026, scaling its Residential Credit portfolio by 30% and its MSR portfolio by 9% quarter-over-quarter to capture attractive relative value.
Forward Guidance
Annaly outlines clear strategic directions, including intermediate coupon TBA reinvestments and a robust pipeline of callable securitization transactions.
Language Signal
The tone is predominantly constructive and positive, highlighting 'record' volumes, 'attractive' relative value, and 'exceptional' credit quality, while acknowledging elevated macro risks.
Perceived Risk
The manager notes near-term risks around inflation and Middle East conflicts but highlights that higher rates and wider spreads also create favorable entry points and valuation gains for the MSR portfolio.
Opportunity Density
The opportunity set is characterized as rich, with attractive levered return profiles across all three core strategies (Agency 14%-16%, Residential Credit 12%-15%, MSR 11%-13%).
Time Horizon
The investment strategy focuses on long-duration mortgage assets, long-term credit compounding, and MSR servicing flows that represent a multi-year horizon.
Top Conviction Themes
Key Catalysts
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