Armour, which has returned 15 percent in the past year, had $20.9 billion in assets and 14 employees as of Dec. 31, according to a company filing. The firm has recently doubled the size of its office facilities to accommodate additional staff, according to Chief Financial Officer James Mountain.
The firm is “growing on pace with others in the industry and we are raising capital, expanding our facilities and increasing staff in step with that,” Mountain said.
Selling Shares
Mortgage REITs’ stock sales accelerated this year after grinding to a halt at the end of 2012 when their stock prices fell because of renewed Fed efforts to push down home-loan rates.
American Capital sold $1.6 billion of shares last month, allowing it to purchase as much as $15 billion of government- backed home-loan securities, through the use of borrowed money, according to Credit Suisse Group AG. Mortgage REITs have grown enough to make them eligible to be included in the Standard & Poor’s 500 Index, S&P said in a statement last month.
This addition could create more demand for the shares from mutual funds and exchange-traded funds, Morgan Stanley analysts led by Vipul Jain wrote in a March 1 report.
While mortgage REITs are showing attractive dividend yields -- they have to pay out 90 percent of most types of earnings in dividends, which allows the firms to avoid taxes on the income - - and drawing investor interest, the firms have “some of the characteristics of things one should worry about,” General Re- New England’s Gilbert said. “Is it a full-fledged bubble yet? Perhaps not. Could it go further? Certainly.”
Risk Taking
Fed Governor Stein, who voted in favor of continued asset purchases at the central bank’s January meeting, referenced mortgage REITs in a Feb. 7 speech discussing how some credit markets are showing signs of potentially excessive risk-taking.
The firms had “grown rapidly” by using low-cost, short- term financing to fund purchases of longer-term debt, he said.