William Browder, founder of the Hermitage Fund, practices shareholder activism in Russia. Yes, really. He has sued Russian companies 48 times and lost 43 times. It’s hard to imagine a riskier occupation. Or, perhaps, a more lucrative one.

Mr. Browder manages about $1.3 billion in his fund and another $300 million in managed accounts. Since its inception in 1996, the fund has appreciated 963%. It most certainly has not been smooth sailing.

The story begins with a young man inspired by his grandfather, who led the Communist Party in America. After graduating from Stanford Business School, Mr. Browder joined the Boston Consulting Group’s London office. Eventually he moved to Salomon Brothers and was assigned to Russia, a territory that at the time was at the bottom of the pecking order.

However, it was at the early stages of Russian privatization, and during Mr. Browder’s first trip he visited a trawler operation in Murmansk. The company had just completed purchasing of new ships aggregating $2 billion in value. The management was busily taking advantage of the Russian privatization program to acquire 51% of the entity for $2.5 million. Even a youngster could sense a financial opportunity.

Back in London, Mr. Browder became something of an evangelist for investing in Russia, to the point where the lads around the water cooler scattered at his approach. Eventually, however, a senior partner in the New York office caught wind of his enthusiasm, and perhaps some inkling of Russia’s potential, and sent him some of the firm’s capital to trade Russian stocks. With that meager experience, he was a veritable sage compared to others. Three years later, the late Edmond Safra sent him to Moscow with $25 million to open a hedge fund.

He arrived with a cell phone and briefcase, but without knowing a word of Russian. However, he set up shop and started playing the market. Russian stocks were depressed at the time by the prospect of a Communist victory at the polls. President Yeltsin’s approval rating was only 4%; prospects of further democratization were bleak.

However, the oligarchs, who control enormous corporate wealth in Russia, realized a Communist victory would empty the honeypot. So in an unusual collaboration they banded together to work for Yeltsin. As the president’s approval numbers doubled to 8%, the market started to climb.

Mr. Browder got in the way of the tide. The first month, May 1996, his fund rose nearly 34% net. In June, his stocks were up 47.5%. From inception until October 1997, the fund appreciated 775%.Then all hell broke loose.

Mr. Browder made his first big mistake. In Asia, currencies were getting clobbered, and markets were falling. Mr. Browder analyzed the situation and decided Russia would not be affected by the so-called “Asian flu.” There was little of a trading relationship between Russia and the countries involved and not much crossover investing. He held his stocks. Oops.

What Mr. Browder failed to appreciate was that a collapse of one risky asset class would precipitate a chain reaction in which all such investments got nailed. The Russian market fell 88% peak to trough. The Hermitage fund went from $1.1 billion to $120 million.

Unlike many competitors, Mr. Browder survived. He didn’t use leverage, didn’t own bonds (made worthless because of a government default), and most importantly, his investors stayed with him. There were, according to Mr. Browder, 42 funds at the peak; only 8 survived. In the aftermath of the storm, a chastened Mr. Browder developed his current style of investing in Russia, which is perhaps less dependent on market movements as a whole. Instead, he attempts to force managements to let shareholders in on the party, either by increasing dividends or taking steps to push up stock prices.

He harries managements, much like Robert Monks in America, demanding better governance, shareholder rights, and realized value. In a country in which cumulative voting is the norm, he often goes after a seat on a company’s board. He pursues regulators, demanding their involvement, and, perhaps most importantly, he goes to the press. Even when he loses a lawsuit, the publicity surrounding the issue usually works to his advantage, coercing companies into playing ball.

It’s not all Quixote-like pursuits. Mr. Browder’s group works hard to establish value in a murky world. He claims to have one of the best “forensic” accounting groups around, which spends its time trying to determine what Mr. Browder calls “profits after stealing.”

His team of 16, mostly Russian experts recruited from top business schools in America, visits managements, dives into obscure records, and tries to put the numbers straight. The good thing about a bureaucratic state, according to Mr. Browder, is that there are forms filled out, and available, covering just about every aspect of a company’s operations.

What do the Russians think about this interloper who messes with their companies? Apparently, they applaud him and often climb on board, as do his competitors. Does the approach work? Year-to-date he is ahead 25.7%, compared to 16.1% for the RTS Index, which charts Russian equities. Despite setbacks earlier this year, his fund is up 963% from the bottom of the abyss. You could say it works.

How does Mr. Browder see the Russian market in months to come? He is quite positive, for several reasons.

First, he is a fan of President Putin. He is convinced that Mr. Putin is a friend to capitalism, and to the small shareholder. He considers the press’s outrage about the treatment of Yukos’s Mikhail Khodorkovsky, who was arrested in October 2003, and the outcries over Mr. Putin’s curtailing of regional governors, completely off-base.

In his view, the real threat to progress in Russia is the enormous power wielded by the oligarchs and the undermining of central authority. He points to numerous Putin initiatives as evidence of not only his pragmatism, but his encouragement of foreign investment. For instance, his recent decision to begin the liberalization of foreign ownership at Gazprom and his welcoming of a $2 billion investment by Conoco in Lukoil encouraged investors to bid the Russian market higher. These developments were taken as a signal that the Yukos affair was a one-off, and not a new anti-corporate initiative.

Perhaps more significant is the substantial turnaround in Russia’s economy, which breaks even according to Mr. Browder at $28/bbl oil prices. Oil and gas now account for 56% of the country’s exports and 60% of tax revenues. In the second quarter Russia posted the highest budget surplus in the country’s history, and central bank reserves grew by an unprecedented amount.

Perhaps more impressive is that Mr. Putin has established an “oil-stabilization fund” to counter a possible falloff in oil revenues, which now stands at $11 billion.

Suddenly, Russians are happier holding rubles and Russian stocks. Though Mr. Browder’s fund is composed of foreign shareholders – about 80% European and 20% American – he considers foreign investors today of marginal importance, which is a real turnaround. It is Russian money driving the local markets.

A falloff in oil prices or softening in economic activity in various markets could cause a weakening in Russian markets. However, the underlying economic and political trends should be at Mr. Browder’s back as he continues to fight for shareholder rights and reaps the resulting profits.

Ms. Peek is a former managing director of Wertheim Schroder, now a part of Citigroup.