WB recommends SOFAZ to invest in riskier instruments
Azerbaijan, Baku, Nov. 2 / Trend N. Ismayilova /
The State Oil Fund of the Azerbaijani Republic (SOFAZ) should diversify its investment portfolio, director of the WB department for cooperation on sovereign investments Jennifer Johnson-Calari said during the conference on "SOFAZ's place and role in the national oil strategy" in Baku on Wednesday.
"SOFAZ's investment policy has become more liberal after making changes to the legislation," she said. SOFAZ should establish a system for investing in riskier instruments - stocks."
As an example of a successful fund with a diversified portfolio, Calari mentioned the Nobel Foundation. After a decision was made to invest in securities with higher risk, the yield from the investment activity increased.
The investments only in government securities with low-risk were disadvantageous to the fund against inflation. At present, 55 percent of the portfolio of the fund are the companies' stocks, 20 percent - state bonds, 25 percent - other investments, for example, in real estate.
"We think it is possible for SOFAZ at the first stage to place 5 percent of the investment portfolio in the companies' stocks and 5 per cent - in real estate," she said.
She said that over time, this diversification will intensify. SOFAZ will have a portfolio apportionment similar with the already established funds.
SOFAZ investment department deputy director Rovshan Javadov said that the fund agrees with the WB representative's proposal. For the first time, apportionment is likely to hit 5 percent. However, it will be determined only after the investment strategy is prepared.
"SOFAZ attracted consultants to assess the opportunities of these new asset classes," he said. "We will form a knowledge base on it over the next two or three years."
He also stressed that short-term investments will not meet the requirements of the fund.
"We chose the two countries - Russia and Turkey to invest the assets, because our countries have historic close friendly relations," he said. "However, investments can be made in the national currencies of other countries in the future."
SOFAZ was established in 1999.
As of October 1, SOFAZ's assets increased by 41.6 percent compared to early 2011 ($22 billion 766.8 million) amounted to 32 billion 242.5 million.