Azerbaijani State Oil Fund postpones to reconsider investment policy

Business Materials 2 June 2009 18:02 (UTC +04:00)

Azerbaijan, Baku, June 2 / Trend , I.Khalilova /

State Oil Fund of Azerbaijan (SOFAR) postponed reconsidering its investment policy until stabilization of the situation on world financial markets, SOFAR Executive Director Shahmar Movsumov said on June 2.

"Still it is difficult to say when it will be possible to increase the portfolio of shares in the structure of our assets, said Movsumov. - We want to make sure that all crisis processes have finished."

The World Bank ofered Azerbaijan to reconsider its investment policy and invest into more risky financial instruments, WB Treasury and RAMP Director Jennifer Johnson-Calari said.

"Such long-term investments for a period of 10-20 years has always justified themselves, as the return on them is higher than on bonds. The population in Azerbaijan should understand that if the funds are invested in stocks, you have to be prepared for the fact that in a short term (within one year) the high volatility of securities' value leads to even negative returns," said Calari. .

Calari believes in a short period of time the situation is usually resolved and the stock management revenues rise in a number of times. Before transition to such an investment policy, the country must be ready to any changes in stock prices.

"So far Sofaz had been pursuing a conservative investment policy, because a platform for management of funds was being formed during that period. However, it is high time to invest in more sophisticated financial instruments. They will give more revenues to the country," Canari said.

"Sofaz announced its plans to expand the stock portfolio, but they have been postponed due to the global processes. This decision was correct, as evidenced by the fact that the crisis has had no impact on Sofaz revenues, as stock prices fell by nearly 50 percent. Perhaps, when the crisis slows down, we will reconsider our investment policy before the end of 2009 or beginning of 2010 and will invest our funds in securities of the companies which decreased their stock prices but are not close to bankruptcy," said Movsumov.

Sofaz has been cooperating with the RAMP (Reserve Assets Management Programme) since 2007. The Fund transferred $100 million to the WB Treasury. The WB Treasury is managing $114 million, which has increased as a result of placement revenues.

RAMP has been operating for over 40 years.

Only 0.1 percent of Sofaz assets were places in stocks in 2007 and 0.02 percent ($2.34 million) in 2008, and 0.03 percent in the first quarter.

As a result of 2008, 93.79 percent ($10.4 billion) of Sofaz investment portfolio was placed in securities, and 84.93 percent - in the first quarter of the year.

A total of 46.13 percent of the funds were placed in securities for up to one year, 649.41 percent - from 1 to 3 years, 4.35 percent - from 3 to 5 years, 0.11 percent - from 5 to 7 years.

Sofaz assets hit $8,721.4 trillion, while the figure was $11.219 trillion in 2008.

On June 2, the official exchange rate is 0.8035 manat to $1.

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