We spoke to Slava Rabinovich, CEO of Moscow-based Diamond Age Capital Advisors, a hedge fund with $105m under management. This is what he told us about his career, and life in general.
How did you come to work in the Russian hedge fund sector?
In 1996, I was about to graduate from the Stern School of Business at New York University and was interviewing with investment banks with a view to working in Wall Street. I also had interviews with investment banks based in Russia, such as Renaissance Capital, Alfa Bank, Creditanstalt, etc. Then suddenly I got a call from Bill Browder, the founder of Hermitage Capital Management, who had been shown my CV by mutual acquaintances. Following a lengthy interviewing process at Hermitage, I received a job offer and thought that compared to banking, asset management would be difficult to get into in the foreseeable future if I did not take it up. This aspect of finance had interested me at business school, where I was a member of the Investment Management Club. Thus after eight years of living in the US, I decided to move to Russia.
What inspired you to start your own fund? What kinds of resources did you have at your disposal?
I wanted to realise my creative potential, be my own boss, and make money. I had two million dollars available from friends and family. My first step was to look for a so-called “anchor investor” who would receive a share in the business in exchange for investing anchor capital in the fund.
However, it soon became clear that finding such an investor was not an easy task, as many wanted an unreasonably high stake in the company, or else took too much time arriving at decisions or imposed other limitations that were unwarranted in this business. In short, my search attempts led me to decide to launch an independent fund and an independent fund management company without taking anchor capital, starting on a small scale and gradually accumulating investments in the fund by regular, non-anchor investors.
How do Russian financial services professionals differ from their colleagues in the West? Is the culture very different?
Within the Russian corporate culture people go to work to make friends, and within the American corporate culture they go to work in order to work.
But if you compare specialists at the same level, there will be no differences. Take for example Stephen Jennings, the main shareholder of Renaissance Capital. Jennings will be Jennings anywhere. And all the top people at the bank, be they Russians, Americans or other foreigners, are all of the calibre of leading Wall Street banks.
What do you think is lacking in today’s Russian financial market?
I could give you a top 100 or a top 1000 list. The remaining state-controlled companies need to be privatised as soon as possible. Laws and regulations need to be developed to enable the creation of hedge funds in Russia that could make the same deals “onshore”, within the country, that are currently only possible outside of Russia. The pension system needs to be reformed to foster the development of private pension funds that would raise “long” money that would then enter the capital market with a long investment horizon. A lot of things need to be copied from Hong Kong and Singapore in terms of the financial market structure so as to avoid reinventing the wheel. It’s worth listening to Jim Rogers who has moved himself and his family to Singapore from the US and has publicly explained his move from several perspectives including the investment rationale.
What do you pay attention to when you hire people for your company? What is a surefire way NOT to get hired by you?
Being a small company, we have never used headhunters and do not have an HR department. Everyone who works there has been referred to us by friends and acquaintances. A surefire way NOT to get hired would be undue arrogance combined with insufficient knowledge of the subject.
Many people hope to spend several years working at an investment bank before starting up their own business but often postpone the departure point. What advice would you give them?
Quoting Steve Jobs, “Stay Hungry. Stay Foolish.”
Do you see Moscow and Russia as a place where it is still possible to make very big money?
Of course it’s still possible. Money an be made practically everywhere and anytime unless you are in North Korea or Iran. But it is very difficult if not impossible to make millions, and especially billions, while working for someone else rather than for oneself.
Does it still make sense for Russian financial services professionals to seek experience overseas?
No one has ever been hindered by the experience of living abroad so long as the experience is positive, i.e. so long as people use their time abroad for personal and career development. It especially helps when people manage to study and get a degree abroad, be it an MBA or a postgraduate degree in engineering from a top-ranking university. One can’t keep hiding one’s head in the sand and sing the praises of their surroundings not knowing what it’s like outside.