Photographer: Gianluca Colla/Bloomberg

Knight Vinke Sells UBS Shares on Investment Bank Size Concern

  • Activist fund won't comment on size of the stake it sold
  • Sale at end of 2015 predated UBS shares' recent plunge

Knight Vinke Asset Management sold its stock in UBS Group AG as the activist fund, led by Eric Knight, said it remained concerned about the size of the Swiss company’s investment banking arm.

“Our concerns about UBS’s exposure to investment banking remain, especially in current market conditions, and we continue to monitor the situation,” New York-based Knight Vinke said in an e-mailed statement. The position was sold toward the end of last year at a “substantial gain,” it said. A spokesman for the fund declined to comment on the size of the stake.

Knight Vinke started advocating that UBS spin off its investment bank in an open letter to management in 2013. While UBS Chief Executive Officer Sergio Ermotti has pledged to emphasize wealth management over the securities unit, the Zurich-based lender lifted its cap on risk-weighted assets at the investment bank in the months leading up to Knight Vinke’s sale.

The share price at the time of the sale was “approximately double” the price the fund paid for the shares, Knight Vinke said. In 2013, the fund said it held about 1 percent of the bank.

The shares have tumbled since then, losing 25 percent of their value in 2016. The last three months of 2015 were particularly difficult for UBS’s investment bank, led by Andrea Orcel. Buffeted by volatile markets that discouraged clients from trading, the division posted a 63 percent decline in profit.

UBS said in its third-quarter results presentation that it removed a cap of 70 billion francs ($70.6 billion) in risk-weighted assets for its investment bank, replacing it with an “expectation” of around 85 billion francs.

“We did not change the risk profile of our investment bank and our shareholders understand that,” said Mark Hengel, a spokesman for UBS. “There is no concrete indication he ever was a large shareholder of UBS,” he said, referring to Eric Knight.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE