At a time of confronting volatility, much of which can be sheeted back to Russia’s invasion of Ukraine, organisers Matthew Grounds and Guy Fowler, co-executive chairs at Barrenjoey,and veteran fund manager and philanthropist Chris Cuffe see Browder as a star pick.
“What is going on in Russia, which equals what is going on in energy in the world, is at front and centre for most investment professionals,” Cuffe says.
“What is going to happen in Europe this winter will be interesting. What it means for energy security is interesting – the race for renewable energy – it is all very topical.”
Hearts & Minds, now in its sixth year, is pitched as the thinking investor’s conference and raises funds for medical research.
Speaking ahead of the conference, Browder said: “This worthy undertaking is the antithesis of Vladimir Putin’s Russia where institutionalised corruption has siphoned off more than $1 trillion which should have gone towards hospitals, schools, roads or housing.
“Instead, this money is being used to pay for the planes, boats, dachas and indulgent lifestyles of Putin and his cronies.”
Fowler says Browder is part of Russian folk lore. “He has become the Russian state public enemy. It is scary to think this is somebody who at one stage in 2005 was the largest Western investor in Russia,” he says.
Browder founded Hermitage Capital, which invested in Russia during a spate of privatisations. But the process was found to be deeply corrupt, delivering billions of dollars into the hands of many of the Russian oligarchs of today.
Browder’s stakes in Russian companies suddenly diluted.
“They would just say there are a million shares on issue yesterday, now there are 100 million and you didn’t get any,” Fowler says. Grounds adds: “Or there was a meeting in some location like Siberia and you needed to be there at that particular time.”
In 2008, Browder’s Moscow-based lawyer, Sergei Magnitsky, uncovered a massive fraud that involved the theft of $US230m of state taxes. Magnitsky testified against state officials involved and was arrested. He later died in prison.
Browder’s campaigns for targeted sanctions against Russia over human rights abuse led to the Magnitsky Act, first passed in the US and in Australia last year.
Browder will be interviewed by Luke Harding, who from 2007 to 2011 was the Guardian’s Moscow bureau chief before he was expelled by the Kremlin.
Grounds says the interview will seek to second guess the mind of Putin. And it will be from an undisclosed location. “His first book was called Red Notice, the second was called Freezing Order. We don’t want to create the third book,” he says.
Sohn Hearts & Minds was an idea unashamedly pinched from the philanthropic US Sohn Conference by Grounds, Fowler and businessman Gary Weiss in 2016.
It is through Weiss’s friendship with Chris Barter, co-founder of high-growth VC firm King River Capital who worked in Russia, that Browder has been secured.
For the first time in two years Hearts & Minds will be in person, and in Hobart supported by the Tasmanian government looking to pitch its investment potential from clean and green to whisky.
Four hundred attendees have booked in to hear keynotes from international and Australian fund managers with a string of often fresh talent who each have just 10 minutes to deliver a TEDx-style pitch on one stock.
New speakers announced on Tuesday are Claremont Global’s Bob Desmond, WaveStone Capital’s Catherine Allfrey and Regal Funds Management’s Tim Elliott, as well as Auscap Asset Management’s Tim Carleton, Peter Cooper of Cooper Investors and Munro Partners’ founder and CIO, Nick Griffin.
Where Hearts & Minds differs from Sohn in the US is the ASX-listed investment company, HM1, created in 2018 from the conference and which provides a concentrated equities portfolio of the highest conviction ideas from fund managers, while also supporting medical research.
Sixty-five per cent of the funds under management comes from six core fund managers who each pick three stocks. Thirty-five per cent comes from the most popular 10-minutepitches of the conference.
HM1 has been a clear casualty of the market fallout. In the past 12 months a concentration of picks in the hi-tech sector played poorly. HM1’s annual investment portfolio performance to June 2022 was -33.6 per cent compared with a MSCI return of -6.5 per cent.
Shares have fallen more than 40 per cent this year and HM1 is trading at a discount to net tangible assets.
“We are not happy with the discount, we are not happy with the results for the last 12 months, but we look at the results since we listed and we had two great years to begin with,” says Cuffe, who chairs HM1.
Grounds says: “We did the IPO at $2.50, we’ve paid dividends, our pre-tax NTA is at $3. The performance is not perfect but not terrible either and we have given $40m away to medical research. So maybe we get a B- but we are pretty focused on getting our grades up.”
The conference selection stocks were strongly correlated to the tech sector and fell 50 per cent in the seven months to June 30.
Cuffe says HM1 is learning and will ensure more diversity in the conference portfolio.
HM1’s core managers who could take a longer-term view with three stocks were also weighed down by picks such as Eat Takeaway, Zillow, Block and Tyro Payments. Some of these stocks are now recovering.
This article was originally posted by The Australian here.
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