Executive Reflects on Agency REITs’ Role

American Capital Agency Corp. executive told investors Wednesday that he believes agency real estate investment trusts are proving to be an appropriate vehicle for returning private capital to the mortgage market.

Agency REITs are “accomplishing everything policymakers wanted to accomplish,” ACAS president and chief investment officer Gary Kain told attendees at Citi’s U.S. Financial Services investor conference on Wednesday.

People do question REITs’ investments in this area because REITs “are not depository regulated like a bank,” he acknowledged, when asked about the concerns some have about REITs’ leveraged positions during a question and answer session at the webcast meeting.

But he said he feels the private markets are effective in regulating the amount of risk a REIT can take.

Kain said that he considers agency REITs’ leverage to be relatively low, about “15% to 20% of what was employed by the GSEs pre-crisis.”

In other circumstances, REITs also have faced questions about whether their leverage is not high enough.