Two Harbors Investment Corp. is ready to double its money. The real estate investment trust (REIT) is managed and advised by (and was founded by) PRCM Advisers, a subsidiary of Pine River Capital Management. The trust primarily invests in agency residential mortgage-backed securities (RMBS) with fixed or adjustable interest rates that are backed by government-supported enterprises Fannie Mae, Freddie Mac, or Ginnie Mae. About a quarter of its mortgage portfolio is made up of non-agency RMBS, such as subprime mortgages, which carry more risk than federally-backed securities but offer higher yields. Chairman (and Pine River CEO) Brian Taylor controls almost 20% of the trust's stock.
Pine River Capital Management set up Two Harbors in 2009 through a reverse merger with a blank-check company named Capitol Acquisition Corp. Since then, the company has completed three follow-on public offerings that netted more than $520 million, which it has used to invest in agency and non-agency RMBS and other financial assets. Two Harbors plans to continue to maintain its portfolio of agency RMBS sprinkled with riskier investments to boost yield. – less