Our approach

Overall, despite difficult macro-economic conditions in 2015, we made good progress establishing the foundations for LetterOne.

Mikhail Fridman, Chairman of LetterOne, talks about L1 and our investment approach.

Q: How is your approach different?

Our investment philosophy at L1 is based on nearly 30 years’ experience and the founding principles of our partnership as shareholders. In 1988, as a group of friends from university, we established our first business as entrepreneurs, employing other students from different universities in Moscow to wash windows. Over time our business interests grew. We started importing and exporting, and trading commodities. We then built our own successful businesses in oil and gas, insurance, retail, telecoms, and commercial and investment banking.


Q: What has been the key to your success?

The way we work as partners has been fundamental to our success. At L1, we believe in working in the same spirit of partnership, not just between shareholders, but on a much wider basis with our management teams, employees and our advisers. It is important for us to work with people we respect. We recruit sector specialists who have distinguished themselves in their fields. We want them to enjoy the intellectual challenge and opportunity to work with us as partners. We are, at the end of the day, a small company, made up of less than 100 people. By being open, we make sure we learn from our successes but also our mistakes.


Q: How do you foster entrepreneurialism?

As businesspeople, we have found that being able to challenge assumptions and using a combination of creativity, agility and unconventional thinking to solve problems are essential. We encourage this and a sense of ownership and accountability across the organisation. We are meritocratic and rewards are structured through a private equity-style motivational compensation system. We don’t put much emphasis on hierarchy, or make any distinction because of who somebody is, but prefer flat, small organisations. We welcome open discussion. We value the quality of ideas and diversity of thought when evaluating an issue. But once a decision has been made, it is crucial to be absolutely disciplined in its execution.


Q: How do you maintain flexibility in this volatile macro-economic period?

In today’s changing world, we think that it’s important to be flexible but consistent. As the last year has shown, the world is going through a period of macro-economic uncertainty, and so it’s crucial to be patient and flexible.

In this uncertain environment, we must balance opportunism and prudence. I think our capital allocation reflects this delicate balance. We enter investments with a view to the long term, but if the right opportunity to realise value arose, we would prudently consider it, if conditions were right. Balancing these factors is essential and is the art of business.


Q: Why do you like to take an active investing approach?

Perhaps it comes from our background. Some of us were born in Ukraine, and we started our businesses in Russia as students. We were newcomers to capitalism in the early 1990s and as entrepreneurs enjoyed building companies from scratch. We like to understand how businesses work. We want to know their structure, skills, processes and the basis of their competitive strengths. We look at everything with fresh eyes, always asking what works and what doesn’t. We are committed to clear and respected governance structures and the highest professional and compliance standards, in both L1 and our portfolio companies. Our aim is to build and grow investments that stand the test of time and create value for all our partners and stakeholders, and which will become the foundation for a new, highly regarded global investment business.