Frequently Asked Questions:
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Why the name Chimera?
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In Greek mythology, the Chimera is a strong fire breathing creature with the head of a lion, the body of a goat, and the tail of a serpent. At Chimera, we look to take advantage of opportunities in the market and seek to invest in multiple asset classes. |
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What is Chimera and why a REIT Structure? |
We are a public company traded on the New York Stock Exchange under the ticker CIM. We are organized as a real estate investment trust (REIT). REITs receive special tax treatment from the IRS. They do not have to pay corporate taxes on the money paid out as dividends to shareholders. This avoids the "double taxation" issue associated with many dividend payouts.
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Does Chimera use financing (leverage) and/or hedging as part of its strategy?
We use leverage to increase potential returns to our stockholders. We generate income principally from the spread between yields on our investments and our cost of borrowing and hedging activities. We are not required to maintain any particular debt-to-equity ratio as we believe the appropriate leverage for the particular assets we are financing depends on the credit quality and risk of those assets. In utilizing leverage and interest rate hedges, our objectives will be to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a spread between the yield on our assets and the cost of our financing.
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What is Leverage?
Leverage is another word for debt. Almost everyone in the United States uses leverage. When you take out a mortgage on your home or use your credit card, you are using leverage. You take on debt in order to buy something. We use leverage because it can help increase returns, although leverage may result in increased risks. If the asset earns more money than the interest payments on the debt, we can make more than we could if we did not borrow to buy the asset.
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Where does Chimera borrow from?
We expect to use a number of sources to finance our investments, including repurchase agreements, warehouse facilities, securitizations, asset-backed commercial paper and term financing CDOs.
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What Are the Risks Involved With Using Leverage?
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| Leverage is measured by a ratio called debt-to-equity. A leverage ratio of 10 to 1 means that for every dollar raised Chimera borrows 10 dollars. All other things being equal, a high leverage ratio implies a higher level of risk because there is a greater chance that the borrower will not be able to repay its debt. |
Why does Chimera have the same management team as FIDAC and Annaly?
Chimera was founded by Annaly and because Annaly’s investment strategy is so different than Chimera's, Chimera was launched as a separate company. The investments are managed by FIDAC and because Annaly purchased 9.8% of Chimera’s stock on its initial public offering, its interests are aligned with those of Annaly and FIDAC.
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FIDAC and Annaly Capital Management, Inc. |
FIDAC
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What is FIDAC?
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FIDAC, which is Fixed Income Discount Advisory Company, is a wholly owned subsidiary of Annaly. FIDAC is a registered investment advisor which manages assists in managing or supervises investment funds for a wide array of clients around the world on a discretionary basis. FIDAC is the sole investment manager for Chimera. |
What is FIDAC's relationship to Chimera?
We are externally managed by FIDAC, which has a long track record of managing capital and investing in real estate-related assets. The team managing Annaly fulfills the same roles at FIDAC. The team is led by Chairman Michael A.J. Farrell and Chief Investment Officer Wellington Denahan-Norris . FIDAC's team of investment professionals, have built a successful long-term track record through some of the most challenging fixed income markets in memory.
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What is the difference between Annaly and FIDAC?
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FIDAC is the taxable REIT subsidiary of Annaly. FIDAC earns fee income by managing funds and accounts on a global basis for institutional clients and high net worth individuals. Annaly raises money in the public market which it invests in mortgage-backed securities on a leveraged basis with the objective being to generate spread income for distribution to the shareholders in the form of a dividend. |
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Where does FIDAC conduct business?
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| FIDAC manages off-shore and on-shore private and public investment funds distributed globally as well as separate accounts for high net worth individuals, municipal funds and school endowments. |
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Who can purchase FIDAC Funds?
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| FIDAC funds are typically designed to meet the needs of investors outside the U.S. |
