CalPERS joins Knight Vinke's HSBC crusade
US - The California Public Employees' Retirement System (CalPERS) has launched an attack on HSBC bank over what it views as corporate failings and poor financial performance.
It publicly backed calls by activist fund managers Knight Vinke to put measures in place to turn around the fortunes of the company.
Knight Vinke, which has been an outspoken critic of HSBC, manages some US$350m of assets on behalf of CalPERS. It has accused HSBC of being "too large and too complex to be controlled effectively" and demanded it focus on its core competencies to ensure shareholder value.
CalPERS said HSBC's stock price had underperformed compared to its peers over a number of years. It also accused the bank of taking poor strategic decisions and corporate overreach with regards to diversification into non-core business areas where it had no competitive advantage. The pension system said this had led to inferior returns on capital.
CalPERS cited HSBC's move into household acquisitions, which has left the company with "serious losses" due to the US sub-prime loan crisis, as an example of this.
Christianna Wood, global head of equities at CalPERS, responsible for the investment of approximately US$150bn of the plan's US$250bn portfolio, said: "HSBC has a number of issues of concern to shareowners. Knight Vinke is one of our activist managers in Europe and has challenged the HSBC management and board to refocus their business in areas where they have an advantage.
"We support Knight Vinke's engagement of the company and request that the company be more specific about their plan to improve returns on capital and address sub-par fundamentals and stock price underperformance."
A spokesman for HSBC said: "HSBC has a clearly understood and widely supported strategy to rebalance the company towards emerging markets, and we are focused on executing it.
"The bank's financial strength and strategy has seen its share price outperform almost all UK banks and most international peers in 2007."
Knight Vinke, which has been an outspoken critic of HSBC, manages some US$350m of assets on behalf of CalPERS. It has accused HSBC of being "too large and too complex to be controlled effectively" and demanded it focus on its core competencies to ensure shareholder value.
CalPERS said HSBC's stock price had underperformed compared to its peers over a number of years. It also accused the bank of taking poor strategic decisions and corporate overreach with regards to diversification into non-core business areas where it had no competitive advantage. The pension system said this had led to inferior returns on capital.
CalPERS cited HSBC's move into household acquisitions, which has left the company with "serious losses" due to the US sub-prime loan crisis, as an example of this.
Christianna Wood, global head of equities at CalPERS, responsible for the investment of approximately US$150bn of the plan's US$250bn portfolio, said: "HSBC has a number of issues of concern to shareowners. Knight Vinke is one of our activist managers in Europe and has challenged the HSBC management and board to refocus their business in areas where they have an advantage.
"We support Knight Vinke's engagement of the company and request that the company be more specific about their plan to improve returns on capital and address sub-par fundamentals and stock price underperformance."
A spokesman for HSBC said: "HSBC has a clearly understood and widely supported strategy to rebalance the company towards emerging markets, and we are focused on executing it.
"The bank's financial strength and strategy has seen its share price outperform almost all UK banks and most international peers in 2007."
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