Hedge fund manager William “Bill” Browder was once the largest foreign investor in Russia, making his investors piles of money, but if he had to do it all over again, he never would have entered the country in the first place.
“I now understand how completely naive I was to think that as a foreigner I was somehow immune to the barbarity of the Russian system,” Browder said.
Over the past eight years, Browder, the founder of Hermitage Capital Management, has made fighting corrupt Russians his life’s work after the killing of his friend and colleague Sergei Magnitsky.
“I would never have gone to Russia in the first place; I would gladly trade all of my business success for Sergei’s life,” Browder wrote in his newly released book, “Red Notice: A True Story Of High Finance, Murder, And One Man’s Fight For Justice.”
Browder started successfully investing in Russia in 1996. He even had an office in Moscow.
By 2005, however, Browder was barred from entering the country, “blacklisted,” and named a “threat to national security” after he accused Russian tax officials of corruption and embezzlement.
Browder’s friend and tax attorney Magnitsky discovered that Moscow tax officials embezzled $US230 million.
The same officials Magnitsky testified against retaliated, and arrested him on charges of tax evasion. He was placed in pretrial detention for 11 months. There, Browder writes, the 37-year-old married father of two was beaten to death at the hands of Russian authorities. He never said goodbye to his family.
Justice for Sergei
Since then, Browder has embarked on a human-rights campaign on behalf of Magnitsky.
While Hillary Clinton was secretary of state, she sanctioned a visa ban for 60 top Russian officials associated with Magnitsky’s death. The European Parliament also voted in favour of a resolution for European Union member states to introduce a visa ban and freeze bank accounts of the Russian officials linked to Magnitsky’s death. Browder even persuaded the Swiss to freeze some of the bank accounts of the officials.
This week, Browder will be visiting Washington, D.C., to push for the passage of the Global Magnitsky Act, which would punish human-rights abusers all over the world.
“This is a real exponential move forward in terms of defining Sergei’s legacy,” Browder told Business Insider. “If this law gets passed, his death will have hopefully saved hundreds of thousands of lives by creating a consequence.”
An activist approach
Aside from being one of the biggest foreign investors in Russia, Browder was also one of the most successful.
Browder formed Hermitage Capital in 1996 with $US25 million in backing from late banking magnate Edmond Safra.
Browder’s approach to investing in post-Soviet Russia was shareholder activism. That meant challenging corrupt, all-powerful oligarchs.
At its peak, Hermitage managed about $US4.5 billion in assets. Since its inception, the fund has generated returns of 1,500% for investors.
An unlikely capitalist
Browder has an interesting past. He is the grandson of the former leader of the American Communist Party. He grew up in Chicago in a family of academics.
He, however, identifies himself as a capitalist. — though at first not a very entrepreneurial one.
Browder slacked off at his skiing-focused boarding school. He later attended the University of Colorado at Boulder, where he joined an “Animal House”-like fraternity. He eventually got it together, though, and transferred to the University of Chicago, where he studied economics. He earned his MBA from Stanford Business School.
‘Biggest capitalist in Eastern Europe’
Browder moved to London in August 1989 to work for Boston Consulting Group. He made the move across the Atlantic because he wanted to focus on Eastern Europe.
“I wanted to become the biggest capitalist in Eastern Europe,” Browder wrote in his book.
While at BCG, Browder was assigned to help a failing bus company is post-communist Poland.
‘The financial equivalent of smoking crack cocaine’
It was in Poland where Browder discovered privatizations of companies that used to be run by the state. He purchased $US2,000 worth of shares and watched his small portfolio take off.
“Over the course of the following year my investments would double, and then double again,” Browder wrote. “Ultimately, they went up almost ten times. For those who don’t know, the sensation of finding a ‘ten bagger’ is the financial equivalent of smoking crack cocaine. Once you’ve done it, you want to repeat it over and over and over as many times as you can.”
Browder left his consulting job and joined Salomon Brothers. At Salomon, he established himself as the investment banker in charge of Russia. He later quit the bank job and went out on his own to start Hermitage.
Russia today is a ‘sucker’s market’
Today, Hermitage operates as a “family office” hedge fund in London’s Golden Square. Browder returned outside capital to the rest of his investors about a year ago. The fund focuses on emerging markets, but Browder told us that’s not where he’s investing at the moment.
As for Russia, he called it a “value trap.”
Russia “looks cheap on paper but the problem is the economics don’t matter anymore,” he explained, adding “It’s really a sucker’s market.”
‘If I’m killed …’
Browder’s real focus these days isn’t on his fund, it’s on fighting for justice for Sergei Magnitsky. Browder knows there’s a real risk for those who are enemies of Russian President Vladimir Putin and his allies.
“I have to assume that there is a very real chance that Putin or members of his regime will have me killed someday,” Browder wrote in his book.
He continued: “Like anyone else, I have no death wish and I have no intention of letting them kill me. I can’t mention most of the countermeasures I take, but I will mention one: this book. If I’m killed, you will know who did it. When my enemies read this book, they will know that you know.”
Browder wouldn’t call himself brave, though. He saves that accolade for Magnitsky, who he calls “the bravest man I’ve ever known.”
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