Former hedge-fund manager Bill Browder has spent more than a decade warning Western policymakers and financiers about Russian President Vladimir Putin.
For years, Browder lobbied for legislation — known as the Magnitsky Act — that became the template for levying sanctions on Putin and his cronies even before the Russian president’s savage invasion of Ukraine.
As one of the first Western investors to venture into post-communist Russia, Browder was also blunt in his views on the risks of doing business with Russian oligarchs, the billionaires whom he argues are simply trustees for Putin’s wealth and agents of his regime. These people, he says, have helped make Putin the richest man in the world. Before recent sanctions began to dent the oligarchs’ fortunes, Browder estimated that Putin was worth $200 billion or more.
“You don’t want to take [the oligarchs’] money because if you lose it, they’ll kill you,” is the message Browder relayed to his fellow financiers.
Browder’s comments probably seemed like hyperbole to many in the West. But he had witnessed such brutality firsthand when his lawyer, Sergei Magnitsky, was beaten to death in 2009 in a Russian prison after uncovering a plot by law-enforcement officers to steal the tax money Browder’s hedge-fund firm, Hermitage Capital Management, had paid Putin’s government. Since then, several other Russians close to Browder have been killed by Putin.
While their lives may not be in jeopardy, investment managers now find themselves in a tough spot between Western governments’ clamping down on Russian money on the one hand, and their Russian oligarch investors on the other. Firms have been forced to freeze the assets of sanctioned oligarchs but say they have been given no guidance on how to manage the money — and they now have to worry about future litigation from the oligarchs if and when sanctions are lifted.
“It’s just going to be a total nightmare, an expensive nightmare for every hedge fund that has Russian money, because it’s like 2 percent of their investor base and they’re going to probably be spending 25 percent of their time with lawyers, regulatory specialists, and staying up at night wondering how they’re going to get out of this mess,” says Browder.
Until the start of Putin’s war this year, such an outcome no doubt seemed far-fetched to hedge-fund managers, especially those who’ve been scrambling to raise assets in an era when more money has been leaving the industry than coming in. The Russian money was a godsend. By 2021, 118 Russian oligarchs were on the Forbes list of billionaires, with a total net worth of almost $600 billion. That’s close to half of Russia’s GDP — representing what many say is theft from the Russian people.
Hedge funds, along with private-equity and venture-capital firms, all gladly took the money — with apparently few concerns about the oligarchs’ connections to Putin or their past business dealings.
“The view is a lot of these people were the robber barons of their day” — like U.S. tycoons John D. Rockefeller and Andrew Carnegie — says a senior executive at a hedge fund that manages money for sanctioned oligarch Roman Abramovich. After all, Russian oligarchs seemed to have shed their gangster capitalist image of the 1990s, when murdered bankers were a regular sight on Moscow streets.
Browder scoffs at this attitude. “That whole robber baron thing was just oligarch spin,” he says. “And what was interesting is it created a lot of groupthink, like Madoff. Everybody was taking [the money], and so everybody was repeating to each other, looking at each other saying, ‘Well, he’s doing it. I can do it, and it must be okay.’ And so after it became an acceptable thing, nobody thought to dig below the surface and figure out who the guy is.”
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