Shareholder value is often created in companies that are in the midst of a transformation – be it a merger, corporate restructuring, change of control or management or an on-going sector consolidation. During such periods, it is important to safeguard good corporate governance standards and an active approach can be a major contributor to enhanced shareholder value.
Whilst Russia is often associated with economic and political risks, one of the most serious risks of investing in Russia relates to corporate governance and is often not given sufficient weight. If you sit close to the companies in which you are invested, know them well and have tools to deal with these risks, they can at least be mitigated. Triggering, or at least spotting, big improvements in corporate governance can also be a major source of value generation for investors in Prosperity funds. Investors in Russia and the FSU cannot avoid corporate governance risks entirely, as these economies are changing rapidly, and sometimes things happen that investors do not want to happen. But Prosperity’s track record shows that our investment approach has allowed us, with stamina and a "hands-on" approach, to generate value in this market by utilising our active and pro-active investment approach.
Prosperity's active engagement can either take place in isolation or as part of a collective group of investors and with the support of various corporate governance institutions, not least the Investor Protection Association. Where action is collective, it is not unusual for Prosperity to be a leader of discussions and negotiations.