NEW YORK, Aug 8 (Reuters) - Frank Savage, the chairman of Alliance Capital International, a division of money management firm Alliance Capital Management stepped down on Wednesday to set up a private equity fund that will concentrate on sub-Saharan Africa.
The Africa Millennium Fund's target capital is $350 million and it will be among the two biggest private equity funds in Africa, Savage said. A U.S. government agency has committed to raising the debt capital, and the equity capital will be raised from wealthy individuals, he said.
"I have always been intrigued by the Middle East and Africa and this opportunity is very, very appealing," Savage, 63, told Reuters about his decision to leave Alliance, his employer for 28 years.
Alliance Capital Management is majority-owned by AXA Group The Overseas Private Investment Corporation (OPIC) will issue bonds and take a 65 percent stake in the new fund, making this the agency's largest ever project.
Savage also said he is still working closely with Alliance Capital and that this project had been planned for about two years. One other Alliance employee, Leonard Murray, will join Savage in managing the new fund.
While Africa has seen portfolio flows and direct investments rise in recent years, Savage, an African-American, said private equity has lagged behind.
"The region has not attracted the kind of capital other regions have because it got a bad reputation through problems that have gotten a lot of press attention," he explained.
Also there are very few mutual funds that invest exclusively in Africa, in part because the level of economic development is lower in many parts of the nation than in other parts of the developing world.
Morgan Stanley and Alliance both run funds that invest in the region and their performance has been lackluster. The Morgan Stanley Africa Investment Fund has lost 2.2 percent since January and the Alliance Southern Africa Fund lost 7.4 percent during the same time, according to mutual fund research group Morningstar.
Certain regions of Africa endured years of warfare and the spread of AIDS.
Emerging markets have been under pressure recently as investors worry that the economic problems Argentina is facing may impact the rest of the world the way the Asian crisis and Russian debt default did in the late 1990s.
"Raising money for emerging markets is very, very tough these days and this is certainly no exception," Savage said, adding however that he expects his fund to be fully funded in the first quarter of 2002.
The fund will be run by a consortium that includes Savage Holdings LLC, Taylor-DeJongh, Inc., White Williams Holdings LLC and Cycad Financial Holdings, and will concentrate on sectors such as telecommunications, electricity and financial services.
Savage would not say what specific countries will be targeted by his fund, which will be based in Johannesburg. "I will be spending a lot more time there and in the future we could have offices in other places, " Savage said.
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