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. Last Updated: 07/27/2016

RenCap's Jennings Turns Focus to Africa

Stephen Jennings, founder and head of Renaissance Capital, will turn his focus to other emerging economies, primarily sub-Saharan Africa, a move that some saw as a way of hedging the bank against struggling domestic markets.

Jennings will step down as CEO of the country's largest investment bank, but will remain its chairman and CEO of its umbrella company, Renaissance Group. His deputy, Alexander Pertsovsky, will now take the helm as Renaissance Capital CEO.

The move comes as Russian bourses, weighed down by a heavily tax-burdened oil sector, lag behind the other major emerging markets except Venezuela this year, and top officials predict a slowing pace of growth in the longer term.

"Obviously the economy and the market are going through structural changes," Pertsovsky said by telephone from New York. "We will be utilizing our expertise in Russia to enter other high-opportunity emerging markets."

Renaissance Capital's main frontier has recently been sub-Saharan Africa, where Jennings plans to double investment to at least $1 billion this year.

"The increasing number of low- and middle-income countries that are experiencing rapid growth ... has changed dramatically," Jennings said in a telephone interview. For Renaissance Group, "this creates a whole new client base," especially in sub-Saharan Africa, which Jennings said would become the fastest-growing region in the world over the next 10 to 20 years.

Both Jennings and Pertsovsky brushed off the notion that the move was a vote of no confidence for Russia. "In fact, the move underlines the importance of our Russian business, in that a Russian person now becomes the head of our investment banking business," Pertsovsky said.

But red flags have surfaced that the bank is too exposed to local risk. A Standard & Poor's study released last month said the bank was vulnerable to market volatility, and that its risk management "remains a relative weakness."

"There comes a point when you have to decide if you're still going to play for the upside," said an analyst who asked not to be identified, citing his bank's policy of not commenting on its competitors.

"Most of the big local banks try to plan an exit strategy," he added.

Many parts of Africa are vastly under-banked and represent a new frontier in global finance. The move into such markets makes sense as a way to "reduce risk concentration," Jennings said, but added that this was only a "second- or third-level motivation."

A higher priority is to rival the biggest financial corporations in the world over the next 10 years, a prospect that would have been hard to imagine for a Russian company in the 1990s, Jennings said.

"The large international investment banks have listening posts, but they don't have serious commitments [in Sub-Saharan Africa]," he said. "They talk the talk, but they don't have committed resources, and they don't have decision makers on the ground."

Renaissance plans to have a team of 100 people working in Africa by year's end.