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Financial Times: Combative Knight to signal dissatisfaction with bank

By Sundeep Tucker in Hong Kong
Published: September 6 2007 22:15 | Last updated: September 6 2007 22:15

If the top brass at HSBC haven’t heard of Eric Knight, they are in for a rude awakening. Knight Vinke Asset Management, his fund management firm, is on Friday expected to issue a public statement signalling its dissatisfaction with what it regards as the bank’s underperformance.

A statement by a single disgruntled minority shareholder – KVAM rarely takes stakes above 1 per cent – is not usually enough to frighten management. Yet, judging by the fund’s record of engaging with companies in the past three years, HSBC can expect an uncomfortable period of scrutiny from investors and pressure to reform its strategy and management structure.

After business school and a spell as an investment banker in New York, Mr Knight set up Knight Vinke Asset Management in 2003 and turned it into a platform for activist successes at Royal Dutch Shell, VNU and Suez.

However, the 47-year-old cannot easily be pigeonholed as an old-style corporate predator, agitating for a fast buck. He self-styles his brand of activism as “moral suasion” – an alternative method to seeking corporate change by takeover or through investor campaigns at company meetings.

Unlike some of his activist peers, Mr Knight often seeks to engage, and not confront, management to convince it to improve governance and restructure operations to create shareholder value.

Knight Vinke typically invests in one large cap company at a time, disseminating lengthy proprietary research in a target company to fellow activists, board members and financial analysts. It is this approach that he will almost certainly employ in the forthcoming weeks and months in a self-styled “constructive dialogue with HSBC.

Mr Knight’s success and tactics have attracted the support of a wider array of investors, many of whom entrust him with fronting a public battle.

Many institutional investors and pension funds lack the resources or confidence to take on the corporate establishment, so they have taken to encouraging Mr Knight’s campaigns from behind the scenes. As a result, Knight Vinke – whose flagship fund recently passed $1.5bn in assets – punches way above its weight.

In 2004, Mr Knight successfully urged Royal Dutch Shell to abandon its dual British-Dutch structure in spite of owning a stake of just 0.03 per cent.

Knight Vinke counts on the support of Calpers, the giant activist Californian state pension fund, which is its biggest financial backer.

Copyright The Financial Times Limited 2007

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