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Why Matt Halbower Is Betting Big on Fannie and Freddie—But Not Like Ackman
Matt Halbower, founder of event-driven hedge fund Pentwater Capital, is on a heater. He nailed the Twitter merger. He nailed the Nippon–U.S. Steel deal. And now he’s going for the trifecta—with a billion-dollar-plus position in Fannie Mae (FNMA) and Freddie Mac (FMCC) preferred shares.
But unlike Pershing Square’s Bill Ackman, Halbower doesn’t want the common stock. He thinks that’s where the risk is hiding.
“Bill and I agree on almost everything… except the best way to play it.”
Let’s break down Halbower’s Fannie-Freddie thesis, why he’s avoiding the common shares, and what he thinks the Trump administration is about to do.
What’s the Setup?
Fannie and Freddie remain in government conservatorship since the 2008 financial crisis. They’ve paid back more than they borrowed, yet remain un-released. The core investment thesis for both bulls like Ackman and Halbower?
A Trump-led administration will move to privatize and relist Fannie and Freddie.
Halbower believes this will happen before the end of Trump’s next term—and says Trump has already posted twice on Truth Social about doing just that.
Ackman vs. Halbower: Same Bet, Different Play
- Bill Ackman owns the common stock, expecting a moonshot if privatization happens.
- Matt Halbower owns the preferred shares, betting on a more protected path to value.
Why?
Because Halbower thinks the common stock could get diluted hard.
“There will be dilution if things go the way I believe they will.”
The Mnuchin Dilution Solution
Here’s the kicker: The U.S. Treasury currently holds a senior preferred stake in Fannie and Freddie. And not just a notional one—it’s marked as a several-hundred-billion-dollar asset on the Treasury’s balance sheet.
So if the government wants to “rip it up” (as Ackman suggests), there’s a problem:
You can’t legally destroy your own asset without replacing its value.
That’s where Halbower believes we’ll see a move similar to what Steve Mnuchin floated in Trump’s first term:
Convert the senior preferred to common stock.
Dilute the existing common into oblivion.
Leave the junior preferreds (like Halbower’s) intact.
Thus, common holders could get wrecked, while preferred holders quietly win.
Why Halbower Prefers Preferreds
- Preferred shares have priority over commons
- If the government converts its senior stake to common, preferreds remain untouched
- The market has undervalued this restructuring path because most investors can’t model the legal + political risk
“This is not a riskless investment… but I believe preferred gets paid.”
Why Now?
Halbower thinks time is on his side—and Trump’s on the clock.
- Trump has publicly stated his desire to release Fannie and Freddie
- The legal and structural groundwork is already partly laid from Mnuchin’s prior work
- Privatization before 2028 would unlock massive value from these frozen GSEs
- Preferred shares offer a rare asymmetric return with legal priority and political tailwind
Bottom Line: This Isn’t Just a Political Bet — It’s a Capital Structure Bet
Matt Halbower doesn’t just think Fannie and Freddie will be privatized.
He thinks most people are betting on the wrong part of the capital stack.
Preferred = safer, cleaner path to monetization
Common = potential home run… or total dilution
If you’re trying to front-run a Trump-led Fannie/Freddie release, make sure you know where your shares sit when the music stops.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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