Berkowitz’s Fairholme Fund Cut Fannie Stake

Bruce Berkowitz, manager of the $8.65 billion Fairholme Fund, reduced his fund’s stake in the common stock of Fannie Mae and Freddie Mac while maintaining his bet on preferred shares of the U.S.-owned mortgage finance companies.

The Fairholme Fund held 13.7 million Fannie Mae common shares as of May 31, down from 20.5 million shares on Feb. 28, according to documents filed today with the U.S. Securities and Exchange Commission. The fund’s stake in Freddie Mac declined to 11.5 million shares from 17.2 million shares during the same period.

The sales were previously disclosed in a June court filing, which showed that the Fairholme Fund on March 11 sold 6.8 million Fannie Mae shares and 5.7 million Freddie Mac shares to partnerships run by Carl Icahn.

Berkowitz is pursuing a federal court challenge to the U.S. practice of sweeping up the two companies’ profits each quarter and is also one of several investors seeking their return to private ownership. Miami-based Fairholme Capital Management LLC has primarily invested in the two mortgage finance companies through the purchase of their preferred stock, holdings that remained unchanged and were valued at $1.2 billion as of May 31.

Fannie Mae common shares rose 35 percent this year and Freddie Mac’s climbed 39 percent.

(Corrects to show in third paragraph that the sales were previously disclosed in a court filing.)
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