Azernews.Az

By Nigar Orujova

Azerbaijan's state oil fund, SOFAZ, plans to bring its gold reserves to 30 tons by late 2013, SOFAZ head Shahmar Movsumov said in an interview with The Business Year: Azerbaijan 2013.

"According to SOFAZ's current investment policy, up to five percent of our investment portfolio may fall to gold," he said. "We started making our investments in this kind of assets in February 2012 and acquired about 15 tons by the end of last year."

SOFAZ was established in 1999 when its assets constituted $271 million. As of January 1, 2013, SOFAZ's assets amounted to over $34.1 billion.

SOFAZ buys gold on the London Metal Exchange and has already brought some 3 tons of gold to Azerbaijan. The first batch of gold was imported into the country on January 11, while the second batch - on February 1 and the third one on March 1.

Gold delivered to the country will be initially stored in the vaults of the Central Bank of Azerbaijan.

Furthermore, it is planned to construct a vault for the storage of valuables in the new administrative building of SOFAZ. The gold will be stored in this vault after the building is put into operation.

Movsumov said this type of assets has several unique features that make it attractive for investors. Gold can be an effective tool of hedging inflation and currency risks in the long term. Also, gold ensures protection against high volatility in financial markets during economic downturns.

Speaking about the plans for this year, Movsumov said that 2012 was marked by SOFAZ's entering the state securities, real estate and gold markets. SOFAZ expanded the exposure of the currency portfolio, which included the Australian dollar, the Russian ruble and Turkish lira in 2012. SOFAZ will continue working in this area as well as to further diversify the investment portfolio in 2013.

"We plan to increase our exposure for public and private shares," he said. "We will also strengthen our position in the real estate. Currently, we are examining new regions attractive for making investments in property."

Earlier SOFAZ cited an opportunity to buy property in Turkey, Singapore, Indonesia and Malaysia.

At this stage, the fund is considering options of purchasing office real estate with the main goal to get revenues from property lease.

SOFAZ has already purchased the $133 million Gallery Actor, a mixed-use office and retail complex located on Pushkin Square in Moscow, as well as an office complex in London's West End for £177.35 million and a €135 million property in Paris.

The projected total average cost of SOFAZ's investment portfolio for 2013 was set at 25.2 billion manats ($32.1 billion), while as of late 2012 it was projected at 23 billion manats (nearly $29.3 billion).

According to SOFAZ's investment strategy, up to five percent of the investment portfolio may be invested in stocks, up to five percent in real estate and five percent in gold.

The main purposes of the fund are the accumulation of funds and placement of assets abroad to minimize the negative impact on the economy, preventing the so-called Dutch disease to ensure savings for future generations and to maintain the current social and economic standards in the country.