Q&A: Browder stands defiant


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Q&A with Bill Browder, founder and CEO of Hermitage Capital Management, the biggest foreign investor in Russia.

Bill Browder is founder and chief executive of Hermitage Capital ManagementBill Browder is founder and chief executive of Hermitage Capital Management, the biggest foreign investor in Russia. He is a leading shareholder rights activist and an outspoken critic of corporate governance practices in Russia. Since last November he has been barred from the country under a law that excludes foreigners who threaten national security, although no further explanation has been given. Speaking to Euromoney, Browder puts forward his views on the reasons for the expulsion.

Who do you think is behind your expulsion?

I don’t know who caused it. It is one of the most talked about conspiracy theories circulating around Moscow these days. I can say who didn’t do it. I am the most outspoken western supporter of president Vladimir Putin, so it seems very unlikely that this was a political decision. In my view this was caused by someone misusing administrative resources for business purposes.

Was it a bolt from the blue?

Not really – I’ve never been complacent. We’ve been shareholder activists in Russia for 10 years; there are lots of people who are not happy with us and we are used to problems like this. Yet for all the troubles that we have gone through, there have been big beneficiaries of what we do. Most importantly, if you’d put in $1 million at the start of the fund [in 1996] you would have $23 million today. The Russian government has also benefited because instead of them having to clean up big state-owned companies by themselves, they have gotten help from people like us. Hermitage Capital’s assets have grown from $25 million when we started to more than $4 billion today.

The one group of people who have not benefited are those who were making money from the non-transparent practices that we have been trying to stop. For them, my presence in Russia was very unprofitable. Yet however upset they are, they are not going to succeed, either with me or the process. Russia is modernizing slowly but surely.

Is there any specific catalyst behind the decision?

I don’t know who did it. The only thing I can say is that there is a long list of people who have different reasons to be upset with me. We are involved with two corporate governance campaigns at the moment. One is that we are running for the board of Gazprom for the fifth year in a row. The other is that we are suing Surgutneftegas to cancel its misuse of treasury shares. The case was recently in front of the Russian constitutional court. It could also have been caused by a grudge from the past. Sberbank, for example, have been annoyed with us for years for being so outspoken about their heavy cost structure. They even went so far as suing us for defamation a few years back.

Regarding Gazprom, the timing is interesting in relation to the election of the board of directors.

We are running for the board but at the same time Gazprom is moving in the right direction and is slowly cleaning up its business. Now would be an unusual moment for them to do something like this because we have been publicly praising their progress.

Has it had an impact on how you run the fund?

No. I have the biggest team of analysts in Moscow and they are the ones who do the analytical leg-work. My job is to vet their ideas and decide on the size of the investments we make. Because we are buying public securities, we can make a call from anywhere in the world to buy the stocks we like. That is why 13 of the top 15 funds investing in Russia are run by people outside of Russia. The research is where the value is added and our research team is still in Moscow. The analysts have been travelling back and forth to work with me in London without any problem since my visa issue began. The fund is now up 56% since I was banned entry into Russia, so it’s not as if my absence is hurting performance. My staff think I should stay away from Russia more often.

What have you been doing to get the decision overturned?

We have gone to all the Russian government officials we know. Vadim Kleiner [director of research at Hermitage] has approached seven cabinet ministers, four senior officials in the presidential administration, two Duma deputies and nine other officials at sub-cabinet level. The trouble is we are preaching to the converted. The trouble is that the people who don’t want us in Russia seem to be lobbying equally hard.

As we get closer to the IPO of Rosneft and the G8 meeting [in St Petersburg in July], I think the national interest will prevail. I can’t see how it serves the national interest to keep me out.

You’ve made a lot of money, why don’t you just quit?

The thought has never crossed my mind, I’m just hitting my stride now. When I turned up in Moscow 10 years ago all I had was a mobile phone and a briefcase. I have built the biggest investment firm in Russia from scratch. It hasn’t been easy, but I can handle whatever they throw at me.