Fannie Mae Investors Don’t Deserve Big Paydays, Narula Says

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Investors seeking a payday on the shares of government-backed mortgage giants Fannie Mae and Freddie Mac don’t deserve to be rewarded, according to hedge-fund manager Deepak Narula.

The investors -- which include hedge-fund manager Bill Ackman of Pershing Square Capital Management and Bruce Berkowitz of Fairholme Capital Management -- didn’t own the shares before the companies’ 2008 takeovers by the government and didn’t do anything to help them make money since, Metacapital Management founder Narula said Wednesday. Taxpayer backing has instead been the source of their profits, he said.

“More power to anybody trying to make a buck but you’re going after taxpayer money,” Narula said during a Bloomberg Television interview with Stephanie Ruhle and Erik Schatzker at the SkyBridge Alternatives Conference in Las Vegas. “There are other better things to do, and trying to find a legal wrinkle to somehow get taxpayer money is wrong.”

Paul Scarpetta, a spokesman for Berkowitz at Sard Verbinnen & Co., declined to comment Wednesday, as did John Pinette, a spokesman for Pershing Square.

Shareholders from hedge funds to individual Americans with small positions have argued that the government has no right to seize essentially all of the two companies’ profits and needs to preserve Fannie Mae and Freddie Mac to support the economy. Their investments suffered after a Sept. 30 court ruling went against plaintiffs including Fairholme.

One series of Fannie Mae preferred shares among the securities owned by hedge funds has climbed 25 percent this year to $4.84, down from as high as $12.70 last year. The company’s common stock has advanced 42 percent this year to $2.92, down from a 2014 high of $5.82.

(Updates with share prices in last paragraph.)
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