AGNC Investment Corp.s Proactive Portfolio Management: A Long-Term Growth Strategy in a Competitive Market
AGNC Investment Corp. (AGNC) has been taking a proactive and defensive approach to portfolio management, which can drive growth over the long term. By frequently adjusting asset allocations and hedging strategies, AGNC is positioning itself to reduce risks while capturing yield opportunities.
The company has maintained a robust hedge position, with interest rate hedges covering 91% of its Investment Securities Repo, TBA positions, and other debt as of March 31, 2025. This high hedge ratio shows the company prioritizes protection against interest rate volatility, enhancing book value and future earnings.
AGNC Investment has strategically reduced exposure to more volatile non-agency mortgage-backed securities (MBS) and shifted toward higher-coupon Agency MBS. This improves prepayment probability and supports better cash flow visibility. With spreads between Agency MBS and benchmarks (like Treasuries and swaps) reaching near-pandemic highs in early April 2025, AGNC’s large $77.9 billion Agency MBS portfolio (as of March 31, 2025) is well-positioned to benefit from compelling forward returns, particularly on a leveraged basis.
While short-term earnings might fluctuate due to market volatility and spread dynamics, AGNC’s disciplined active management and defensive positioning set a solid foundation for long-term growth.
Competition with NLY & STWD
AGNC competes with Annaly Capital Management (NLY) and Starwood Property Trust (STWD) within the mortgage REITs industry. However, their investment approaches vary.
Annaly pursues a more diversified strategy, combining traditional Agency MBS with non-agency and credit-sensitive assets. NLY is focusing on improving capabilities by acquiring newly originated mortgage servicing rights (MSRs) from its partner network, which will continue to provide a strong advantage in expanding its MSR business. As of March 31, 2025, Annaly’s investment portfolio aggregated $84.9 billion.
Meanwhile, Starwood operates in a different niche, focusing primarily on commercial real estate, including commercial mortgage-backed securities (CMBS) and real estate debt investments. As of first-quarter 2025, STWD held a diversified portfolio of $1.02 billion. While CMBS holdings slightly declined during the quarter, Starwood maintained steady income through principal repayments and targeted acquisitions. Its in-depth expertise in navigating complex commercial markets positions the company as a strong competitor.
Price Performance, Valuations & Estimates
Shares of AGNC have gained 6.4% year to date compared with the industry’s growth of 2.8%. From a valuation standpoint, AGNC Investment trades at a forward price-to-tangible book ratio of 1.08X, above the industry’s average of 0.96X.
The Zacks Consensus Estimate for AGNC’s 2025 and 2026 earnings implies year-over-year declines of 11.2% and 3.9%, respectively. The estimates for 2025 and 2026 have been unchanged over the past 30 days. AGNC currently carries a Zacks Rank #3 (Hold).
In conclusion, AGNC Investment Corp.’s proactive and defensive approach to portfolio management positions it well for long-term growth despite short-term fluctuations in the market. Its strategic asset allocation and robust hedge position enhance its ability to capture yield opportunities while mitigating risks. As it competes with other mortgage REITs like Annaly and Starwood, AGNC’s disciplined management and focus on Agency MBS give it a competitive edge in the industry.
