Is it a coincidence two high-level executives and a longtime board member have decided to leave Annaly Capital Management (NYSE:NLY) or is there something amiss at the nation's largest mortgage real estate investment trust?
That's the question shareholders in the high-yielding mREIT are facing after an announcement on Thursday that Annaly's chief operating officer James Fortescue and its co-chief investment officer Kristopher Konrad have submitted their resignations.
These notices come less than two weeks after longtime director, John Lambiase, declined to stand for reelection after serving on the board for 17 years. In addition to joining Annaly in its first few years of existence, Lambiase is also the father of Matthew Lambiase, the chief executive officer of Chimera Investment Corporation (NYSE:CIM), a publicly traded portfolio company of Annaly that's had a string of problems over the past few years.
Like the elder Lambiase, Fortescue has worked for Annaly since its formative years as a company. He was hired in 1995 and put in charge of finding financing on mortgage-backed and corporate bonds for regional dealers, as well as maintaining a pricing service for Annaly's broker dealer division. He was promoted to chief operating officer in October of 2012 at the age of 38.
Meanwhile, Konrad joined the company in 1997, working in various positions until being appointed as co-chief investment officer in November of 2012. According to Annaly's most recent proxy statement, Konrad is 38 years old.
The resignations follow a number of lean years for Annaly. Since the end of 2012, its book value per share has lost nearly a fifth of its value. The industry overall has been struggling against the headwinds of robust monetary policy, including three successive rounds of quantitative easing, which drove yields on long-term agency mortgage-backed securities down to historic lows in the wake of the financial crisis.
But even more damage has been caused by the reversal, which is driving bond prices down as yields ratchet higher. The trend has wreaked havoc on portfolio values throughout the financial world.
On top of this, Annaly has faced criticism for a number of recent moves. Most significantly, in 2013, it outsourced its management to an external private company owned by Annaly's then-current cast of executives. I, for one, have been particularly outspoken with respect to the move, as it decreases the amount and quality of information shareholders can glean about, among other things, executive compensation.
Is either of these issues behind the recent resignations? They could be. Though, to be fair, it's also entirely possible that Fortescue and Konrad are merely moving on to greener pastures, as the short but sweet golden age of the mREIT business model is widely assumed to be in the past.