HoldCo Asset Management Shakes Up Regional Banking with Activist Campaigns
HoldCo Asset Management, a nine-person hedge fund based in Fort Lauderdale, Florida, is challenging the status quo in regional banking, demanding accountability from lenders and sparking a wave of potential mergers. Founded by Vik Ghei and Misha Zaitzeff, the firm has rapidly gained notoriety for its aggressive tactics, targeting banks with over $200 billion in combined assets.
From Distressed Debt to Activist Investor
HoldCo’s emergence as a force in the banking sector marks a return to activism in an industry largely insulated from it since the 2008 financial crisis. The decline of bank-specific hedge funds and regulatory hurdles to mergers previously shielded underperforming CEOs from market discipline, a situation Ghei and Zaitzeff aim to rectify. Their strategy stems from a background in distressed debt, honed during and after the 2008 crisis. Ghei, previously an analyst at Goldman Sachs and Owl Creek, developed a knack for identifying undervalued assets in the wake of bank failures. He and Zaitzeff, a Brown University computer science graduate with expertise in subprime collateralized debt obligations from his time at Tricadia, founded HoldCo in 2011, initially focusing on acquiring debt from failed holding companies.
“We’re friends, first and foremost,” Zaitzeff, 42, said. “We spend a lot of time debating investments, but we don’t take it personally.”
This early experience battling the Federal Deposit Insurance Corp. (FDIC) in bankruptcy court to recover assets from failed banks instilled in them a reputation for tenaciousness. By 2013, they had secured their first institutional funding and steadily expanded their investor base to include universities, hospitals, and family offices.
A Victory at Comerica and Expanding Targets
HoldCo recently secured a significant victory with Comerica, which agreed to a $10.9 billion merger with Fifth Third Bank under pressure from the activist fund. This success has emboldened HoldCo to launch campaigns against Eastern Bank in Boston and First Interstate in Billings, Montana. Currently, Columbia Bank, a lender with $70 billion in assets and 350 branches across Western states, is in HoldCo’s sights, facing the threat of a proxy battle unless management agrees to a deal. The firm now holds over $1 billion in regional bank shares, including a roughly $150 million position – representing 1.9% of voting shares – in Columbia Bank.
The Core of the HoldCo Thesis: Misaligned Incentives
According to Ghei and Zaitzeff, many regional banks are undervalued due to CEOs prioritizing their own interests over those of shareholders. They argue that CEOs benefit from increased compensation tied to growth through acquisitions, even if those deals ultimately harm shareholder value. Bank boards, often comprised of directors handpicked by the CEOs, are seen as complicit in this practice.
“We’re trying to shame them into doing the right thing,” Ghei, 43, explained. “At some of the banks we own, the CEOs have doubled compensation while their stocks have dramatically underperformed, or even fallen.”
HoldCo also points to investment bankers and research analysts who profit from merger fees as contributing to the problem, while shareholders remain largely silent due to fear of losing access to management. Their solution is direct confrontation, including public shaming and proxy battles to remove underperforming leadership.
The timing of HoldCo’s activism is strategic. Regional banks, still reeling from the 2023 failures of Silicon Valley Bank and First Republic, are vulnerable to activist investors seeking undervalued targets. Furthermore, a perceived shift in regulatory attitudes under the Trump administration suggests that mergers are more likely to be approved, providing a clear exit strategy for HoldCo’s investments.
A Divisive Force in the Banking World
HoldCo’s aggressive approach has garnered both admiration and animosity within the financial industry. The firm has even been banned from attending a banking conference outside Miami hosted by Piper Sandler, an investment bank specializing in regional mergers. A spokesman for Piper Sandler declined to comment. Despite the controversy, HoldCo is rapidly gaining recognition, with one analyst noting that the firm “is quickly becoming a household name in both the regional banking space and the world of activism.”
Columbia Bank in the Crosshairs
HoldCo’s campaign against Columbia Bank is particularly significant. In a 71-page presentation, the firm highlighted that while CEO Clint Stein quadrupled the bank’s assets through acquisitions since 2020, the bank’s share price has fallen 36% during his tenure. Simultaneously, Stein’s compensation increased by 80% to $6.3 million. HoldCo is urging Columbia Bank to halt further acquisitions and instead focus on stock buybacks and a potential sale to a larger bank.
The firm’s approach involves direct engagement with bank leadership, as evidenced by a recent meeting between Stein and HoldCo’s founders at a steakhouse in Fort Lauderdale. However, when private discussions fail to yield desired results, HoldCo is prepared to escalate the conflict through public campaigns and proxy battles.
“Being a bank CEO is the best job in the world,” Ghei said. “You have incredible job security because shareholders never show their face and the board feels like they work for you. Everyone’s happy to meet you, and you have a bunch of investment bankers who want to make fees off of you.”
HoldCo’s rise signals a potential shift in the dynamics of regional banking, promising increased scrutiny and accountability for bank leadership. The firm’s willingness to challenge established norms and its track record of success suggest that its influence will continue to grow, potentially reshaping the industry landscape in the years to come. .
