Russian oligarchic billionaire banker seems to be breaking with the past

The nonprofit has pledged about $650 million to fight the disease, while also betting on early-stage cancer research companies. That adds another layer of protection to Knaster’s fortunes and distances him from his past at a time of massive sanctions against those affiliated with Russia’s fortunes.

“From a strategic point of view, he made a brilliant move to put his assets into this philanthropic foundation,” said US academic David Lingelbach, who headed Bank of America’s Russia operations in the 1990s and had dealings with Knaster. “I’m sure Mikhail Fridman wished he did something like that.”

Knaster was described as the “right arm” of Russian billionaire Mikhail Fridman at one point.Credit:AP

Knaster declined to comment through a spokesman.

Money trail

Like others close to Russian money, Knaster was unable to completely erase the origins of his fortune, about half of which was tied up in Pamplona. His rise from mid-level bank executive to private equity power player, Italian football club owner and philanthropist was due – at least in part – to being in the right place at the right time: a free early post-Soviet Moscow. many years.

After attending Harvard Business School, where he studied alongside future billionaires including York Capital’s Jamie Dinan and Thai entrepreneur Lee, Knaster turned to investment banking, with stints in London and New York for Deutsche Morgan Grenfell, Bankers Trust Co. and Simmons & Co.

Load

In the mid-1990s he ended up back in his birthplace. When Russia opened up to Western investors, Knaster became head of local operations for Credit Suisse First Boston. CSFB is a strong player in the Moscow banking market and Knaster, among the largest earning companies, makes important contacts there.

The move boosted his career and in 1998 he was appointed chief executive officer of Fridman’s Alfa Bank. As the country’s financial crisis unfolded, he took a leading role in helping lenders resolve their debt problems, according to a person involved at the time.

Quickly establishing himself as an invaluable adviser to the oligarchs and their inner circle, he was rewarded with shares in parent company Alfa which has investments in oil giant TNK-BP, Alfa Bank itself, and telecommunications company Turkcell Iletisim Hizmetleri. Knaster received dividends of more than $50 million from Alfa’s holdings between 2001 and 2008, according to the Bloomberg wealth index.

In 2004 he stepped down at Alfa Bank and founded London-based Pamplona, ​​which would manage nearly a third of the wealth of Fridman and other Alfa Group executives. It would also make Knaster a lot of money.

Pamplona was founded with almost all private equity funds coming from Fridman, Aven and Khan. When most of a company’s support comes from a single source, that investor usually negotiates lower fees and a larger profit share.

In 1998, Knaster was appointed chief executive officer of Fridman’s Alfa Bank. Credit:AP

Not in this case. Knaster, a shrewd negotiator, earns the typical high pay for a private equity firm with a lot of backers, according to a person familiar who says the terms are “very good.”

Purchasing groups typically charge a 2 percent fee for the capital they manage, and 20 percent of any profits from transactions. For Knaster, this meant he could make millions of dollars a year in guaranteed income. Pamplona oversees about $750 million in Knaster’s money by the end of 2021, according to the Bloomberg wealth index.

“I’ve always thought of Pamplona as a vehicle for managing some of Fridman’s wealth,” said Lingelbach, now professor of entrepreneurship at the University of Baltimore. “In my judgment, it has never felt like an independent entity.”

A Knaster spokesperson said that Pamplona also started a hedge fund with little or nothing to do with Alfa and LetterOne, that the fees were market rates and that the oligarchs made continued investments in Pamplona because they were impressed by the strong returns Knaster provided. team on initial funding.

His story is an excellent example of how much wealth advisers, managers and facilitators have made for the people who bought Russian state assets for peanuts in the 1990s and sold them for huge profits. It is also an illustration of how difficult it is to disconnect.

Knaster was also asked to advise on other important Alfa-LetterOne transactions. This includes the 2013 sale of TNK-BP which brought in US$14 billion for Fridman, Aven, Khan and Kuzmichev. Knaster was one of the architects of the deal and got about $500 million worth of LetterOne stock at the time, according to people familiar with the matter.

Charity mission

A year after negotiating the sale of TNK-BP, Knaster was struck by personal tragedy when his father died of cancer. That prompted him to set up the Mark Foundation in 2014. He transferred his stake in LetterOne and owner Alfa Bank, ABH Holdings, to the parent entity for the foundation that same year, according to a person familiar with the matter, who asked not to. identified as non-public details.

Load

It has since received more than US$171 million, most of it directly from Knaster and only about 10 percent through LetterOne and ABH dividends, the person said.

The foundation’s stake in LetterOne and Alfa Bank’s owners are significantly less than their book value because they are minority positions in the illiquid company, a Knaster spokesman said.

Days before Russia’s invasion of Ukraine – the birthplace of Knaster’s wife – as tensions rose, he committed to add $500 million more to the foundation.

Several nonprofit venture bets have paid off, including an initial investment in cancer test provider Grail, which Illumina acquires for $8 billion in 2021. It has also invested in biopharmaceutical firm Immunity Therapeutics, as well as biopsy technology. company C2i Genomics and cell reprogramming startup Interius Biotherapeutics.

In a sign of the foundation’s importance to Knaster, he is working on a master’s degree in molecular biology to further his PhD in economics from the Russian Academy of Sciences and a Harvard MBA.

Load

In addition to his charitable work and ownership of the Pisa Sporting Club, Knaster was also involved in new money-spinning ventures. He teamed up with fellow Harvard alumni and co-owner of the Milwaukee Bucks Dinan and hedge fund manager Edward Eisler to launch a special-purpose acquisition company seeking sports opportunities.

He doesn’t seem to have lost his ability to make deals. The Cayman Islands-based company representing him and other SPAC sponsors paid a total of less than US$25 million for the shares. Now it’s worth about US$80 million.

Bloomberg

The Business Briefing Bulletin delivers key stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.

#Russian #oligarchic #billionaire #banker #breaking