Azernews.Az

By Leman Mammadova

State Oil Fund of Azerbaijan (SOFAZ) intends to further increase risky assets in its portfolio, the fund’s executive director Shahmar Movsumov said on 26 September at a conference “Impact Investing: Opportunities and Challenges for Institutional Investors” held in Baku.

“We will continue to work to further increase risky assets.The main goal is to reduce fixed income securities in the portfolio and increase stocks. In this regard, relevant proposals will also be submitted,” the SOFAZ head said.

He noted that SOFAZ pursues a very conservative investment policy. “However, despite this, the Oil Fund began to apply various new types of assets in 2012. This is an increase in private equity, real estate investment and gold,” he said.

Movsumov added that the assets of the fund are near $42.5 billion, to date.

Stressing the importance of impact investing, Movsumov underlined that both value creation and sustainability have to form the basis of SOFAZ’s investment strategy and in this regard impact investing has a great potential to achieve both of these objectives.

“We believe that this conference will be an important step in raising awareness among long-term institutional investors in this area,” he added.

The conference was organized in partnership with International Finance Corporation (IFC) and with the support of the European Bank for Reconstruction and Development (EBRD) to celebrate the 20th anniversary of State Oil Fund of Azerbaijan (SOFAZ). It aimed to discuss the most recent developments in the impact market and investment environment, and the challenges and opportunities in this field.

Speaking at the event, Hans Peter Lankes, IFC’s Vice President of Economics and Private Sector Development, said that IFC has been an impact investor for over 60 years. “Together with our partners in the activity areas, we lead efforts to improve the credibility and transparency of the impact investing in social and environmental benefits.”

“It is gratifying to see that a growing number of investors and companies are seeking to harmonize their business models and investment strategies to achieve positive outcomes for society,” he noted.

He stressed that SOFAZ is the first investor from an emerging market to invest in assets managed by the IFC Asset Management Company.

On the sidelines of the conference, Lankes emphasized that SOFAZ is already an experienced investor and has proven itself in the market. “Positive impact investing is of great importance in the world today. The institutional investors pays particular attention to positive impact investing. Thus, these investments are both socially and environmentally friendly and at the same time high-yielding investments that meet many investors' demands and encourage long-term investments,” Lankes stressed.

The conference was attended by about 200 people, including the representatives of leading sovereign funds, pension funds, international financial organizations, government agencies, the private sector, a number of universities, international experts.

SOFAZ, established in 1999 with the assets of $271 million, is aimed at efficient accumulation of resources and placement of assets abroad, as well as for the preservation and multiplication of funds received from the effective management of oil revenues in order to minimize the negative effect to the economy, prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

Based on SOFAZ's regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The revenues of the State Oil Fund are formed primarily from revenues from the sale of oil, which remains at the disposal of Azerbaijan in accordance with production-sharing agreements.

Budget revenues of SOFAZ reached 17.6 billion manats ($10.36 billion) in 2018, which is a 31.1 percent increase compared to 2017. Revenue of 17.3 billion manats ($10.18 billion) was received from implementation of oil and gas agreements, including 16.6 billion manats ($9.77 billion) from the sale of profit oil and gas, 765.2 million manats ($450.25 million) as bonus payments, 4.1 million manats ($2.41 million) as acreage fee and 18.1 million manats ($10.65 million) as transit payments.

SOFAZ has been included to the list of 100 most significant, resilient, and impactful asset owner and public executives of 2018, ranking 10th. The top 100 ranking has been compiled by the Sovereign Wealth Fund Institute (SWFI) based on several dimensions including, innovation, funding, environmental circumstances, returns, unique programs and initiatives undertaken.

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Leman Mammadova is AzerNews’ staff journalist, follow her on Twitter: @leman_888

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