Hermitage’s Russian Quandary

Hermitage’s Russian Quandary

The objective of this memo is the analysis of the strategy that Hermitage Fund enter into Russian investment community. Discuss what Bill Browder did well and what made him in trouble. To face this dilemma, what should Browder do for next step.

What was the Hermitage strategy, and how well was it working?

Bill Browder has talent in discover business opportunity and generate strategy to achieve his goal. He found out the hidden value in Russian companies, and noticed that was caused by deeply enmeshed management. Unlike most other investment companies who made decision based on research reports from London and New York office, Browder visited Russian companies in person. He gained information from their former employees, suppliers, customers, distributors, and competitors, then shared their research of corporate malfeasance and mismanagement with the press to drive up their share prices and profit from it.

It looks like everything was going well and Browder gain fabulous wealth from this strategy. However, there was a serious problem existed, as an American, Browder did not take political influence as a dangerous factor to his business. Browder was not familiar with how Russian government work and how powerful they are that made he underestimated President Putin. He believed what Putin did is to improve Russian business and investment environment, and they shared same interests. This thought made Browder unaware that he already became a political pawn of Putin’s blueprint. He entered the Russian market at the good time but did not notice the best leaving time that made him in trouble.

What should Browder do now?

In my opinion, facing off against Putin’s government may be a risky move. The expulsion from Russian government was a warning to Browder. His behavior and business