Shortly after starting work as a hedge fund analyst in 2006, my boss called me into his office. He was allocating coverage responsibilities among the team and he handed me US financials. It was a big sector, with lots of sub-sectors to sift for investment opportunities – banks, asset managers, consumer lending companies, and so on. “One word of advice,” he cautioned as I left the room. “Don’t bother with the GSEs – no value to add there.”

The GSEs were Government-Sponsored Enterprises. They were listed on the stock exchange alongside other companies in my coverage universe, the only difference being that they fulfilled a public mandate and consequently had various government protections. The largest at the time were Fannie Mae and Freddie Mac, whose mandate was to promote liquidity and stability in the mortgage market, ensuring that mortgage credit was readily available throughout the nation. Other prominent GSEs included Farmer Mac, whose role was to reduce the cost of capital for far…