HSBC Clamps Down on Browder and Hermitage Russia Fund

By Marc Castro

Mar 26, 2013 06:52 PM EDT

HSBC Holdings Plc has closed down Hermitage Capital Management and its Russia Fund. The fund's co-founder, William Browder, is now facing charges of libel in London and concurrently being tried in Moscow for tax evasion.

Browder accepted the closure, saying "it was too small to continue as a viable concern." He acknowledged that the closure was 'completely in the hands of HSBC', as the trustee and manager of the fund.

The Hermitage Fund was established in 1996 with the late billionaire Edmond Safra holding the largest amount of Russian shares at its peaked back in 2005 with a net worth of US$4 billion. During the same time, Russia prevented Browder from entering the country, which lead to years of legal wrangling especially the death of then Hermitage advisor Sergei Magnitsky in 2009 while in police custody.

Last January 2013, the redemption requests for the fund reached 65% of the fund's value, which by then was frozen to address budget issues as to the legal battles being fought. At the time, the value of the fund was at US$45.6 million and this prompted both HSBC and Browder to wind up the fund, in a letter confirmed with Bloomberg provided by Tim Enneking of Altima Asset Management.

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