SOFAZ prefers to invest into most matured companies, rather than start-ups

Baku, Azerbaijan, June 19

By Azad Hasanli – Trend:

The State Oil Fund of the Azerbaijan Republic (SOFAZ) prefers to invest into the most matured companies, rather than start-ups, Shahmar Movsumov, SOFAZ’s executive director, said in an interview with Caspian Energy journal.

“Start-ups, an initial stage of financing of the venture capital, along with high yield in case of success, are associated with a relatively high degree of risk as such investments turn out successful in exceptional cases which makes it attractive for the riskiest market players (hedge funds, mutual funds),” Movsumov said.

“SOFAZ, in its turn, just like the majority of institutional investors follows a relatively conservative strategy in the field of private equities and therefore invests into the most matured companies,” Movsumov added.

Movsumov said that the main objective of SOFAZ's investment policy has always been to achieve the highest possible long-term profitability from asset management.

“Given the Azerbaijani society’s readiness to take financial risks, such types of assets as shares (including private investments), property and gold have been gradually included into the investment portfolio of the Fund since 2012,” Movsumov stressed.

“Since then, there has been a tendency towards increase of the share of high-yielding assets in our investment portfolio,” Movsumov added. “As a result, the rate of property and shares has been increased from 5 percent to 10 percent and from 10 percent to 15 percent respectively. We think that such tendency can continue but decision making will depend on many factors including the developments in the global economy.”

Movsumov stressed that SOFAZ has been traditionally following a more conservative investment policy.

“As is known, the main factor, impacting the long-term profitability of asset management, is the ratio of the share of high (for example, shares) and low-risk (such as bonds with high credit ratings) instruments in the investment portfolio,” Movsumov said. “In its turn it depends on the level of the risk that an investor is ready to take.”

“Norges Bank Investment Management’s (NBIM) investment strategy, aimed at profits increase, implies a sufficiently high rate of medium-term riskness/volatility of the investment portfolio,” Movsumov said. “According to this strategy, share investment account for 60 percent of NBIM’s portfolio, the share of less risky fixed income instruments makes 35-40 percent of the total portfolio while property investments can total up to 5 percent.”

“As far as SOFAZ is concerned, in addition to providing a long-term profitability it also fulfills the functions of the stabilization fund,” Movsumov said. “We have been traditionally following a more conservative investment policy compared to other world sovereign funds, which is why investments made by us into shares and similar instruments are lower. But as I have already mentioned, we will continue increasing the share of these assets in the common portfolio.”

“According to the major areas of application of SOFAZ investment policy for the year of 2016, intended distribution of the portfolio looks in the following manner: the portfolio of financial instruments with a fixed income and instruments of the short-term money market must account for 70 percent of investments; portfolio of shares must total up to 15 percent; property portfolio must total up to 10 percent; gold portfolio must total up to 5 percent,” Movsumov said.

“As of the end of the first quarter of 2016, 80.6 percent, 11 percent , 4.9 percent and 3.5 percent of SOFAZ’s investment portfolio accounted for financial instruments with a fixed income and instruments of short-term money markets, accounted for shares, for property and gold respectively,” Movsumov said.

Movsumov added that property investments are attractive for SOFAZ for many reasons.

“As you know, there have record-low indicators of bond yield in recent years and in these conditions the number of investors paying attention to alternative types of investments is growing,” Movsumov said. “Property investments are also popular among these options. Apart from this, these investments are interesting from the standpoint of diversification of the investment portfolio as well as partial hedging of investment risks.”

“Until recently, we have made direct investments into property in cities which have matured markets and stable rental yield,” Movsumov said. “But in the meantime, we have already started expanding indirect investments in Asia and Europe, which implies contributions to the investment funds aimed at raising profitability of our property portfolio.”

“At present, owing to increase of prices and stable rental yield, we gain sufficiently high profits from investments we made,” Movsumov added. “Thus, total cumulative return of property portfolio reached 24 percent since we started making investments in 2013.”

SOFAZ was established in 1999 with assets of $271 million.

As of April 1, 2016, SOFAZ's assets increased by 2 percent and amounted to $34.25 billion compared to early 2016 ($33.57 billion).

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 main goals of the State Oil Fund include: accumulation of resources and the placement of the fund's assets abroad in order to minimize the negative affect on the economy, the prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.

The assets of the investment fund were placed as follows: 60.46 percent in European countries, 20 percent in North America, 3.62 percent in Australia, 11.80 percent in the Asia-Pacific Ocean region, 0.63 percent in the Middle East, 0.27 percent in South America, 3.21 percent in international financial organizations, Africa - 0.01 percent.

Azerbaijan confirms 220 more COVID-19 recoveries
Azerbaijan confirms 220 more COVID-19 recoveries
Cabinet of Ministers bans entry/exit to several Azerbaijani cities and districts
Cabinet of Ministers bans entry/exit to several Azerbaijani cities and districts
Azerbaijan confirms 212 more COVID-19 recoveries (UPDATE)
Azerbaijan confirms 212 more COVID-19 recoveries (UPDATE)
Loading Bars
Azerbaijan's Defense Ministry calls on civilians in occupied territories to stay away from military facilities
Ministry of Defense: Armenian Armed Forces resort to provocations to prevent operations of Azerbaijani army
Iran declares amount of loans issued to housing & construction sector
Armenia continues to use underage children in military hostilities (VIDEO)
Photo of another missile launched by Armenia against Azerbaijan unveiled (PHOTO)
President Ilham Aliyev on political objectives of Armenian military attack on Azerbaijan
In center of Baku, there is Armenian church, but mosques on occupied territories were destroyed - President Aliyev
With Georgia our relations are excellent, says Azerbaijani president
Armenian government should not try to frighten its population with Turkey - President Aliyev
And after war with Armenia stops, political settlement enforced, role of Turkey will be very important, very positive - President Aliyev
Wounds of war must be healed by political wisdom, by political will - President Aliyev
Armenian government should understand that they are not now in position to dictate - President Aliyev
Best way for future of Karabakh - to live in peace in harmony, try to become good neighbors again, says President Aliyev
Unlike Armenia, from Russia we buy weapons, we pay for them, says Azerbaijani president
Turkey is not involved in the conflict at all - Azerbaijani president
If Armenia didn’t violate ceasefire today clashes would have stopped - President Aliyev
We cleaned completely the Azerbaijani-Iranian border from Armenian occupants, and there will be no more inconvenience for our brothers across river of Araz in Iran - President Aliyev
If Armenia do not stop, we will go until end to liberate all occupied territories - Azerbaijani president
Azerbaijan became already regional hub for not only for energy, but also for transportation - President Aliyev
Armenia - occupier, it obliged to liberate territories of Azerbaijan - Lebanese political scientist
Loans of dead servicemen and persons affected by hostilities to be repaid in Azerbaijan
Recep Tayyip Erdogan: Azerbaijan begins to return its lands
Religious confessions of Azerbaijan demonstrate solidarity in fight against Armenian terror (VIDEO)
65 Azerbaijani civilians, including women, children, killed since beginning of Armenian provocation - Prosecutor General's Office
State-controlled international television and radio network Voice of America apologizes for its mistake (PHOTOS)
Russian Embassy in contact with family of teenager who died as result of Armenian shelling
Azerbaijani flag to be raised in Shusha, Agdere and other lands - MoD
Armenia gives updated list of its soldiers killed in Nagorno-Karabakh conflict zone
Weekly overview of Azerbaijan's financial market
Attacks by Armenia on territory of Azerbaijan - another act of military aggression, says Azerbaijani top official
Teenagers honor memory of Russian citizen who died as result of Ganja shelling by Armenian Armed Forces (PHOTO)
Iran discloses amount of loans issued to industrial and mining sectors
Iran reveals amount of loans issued to agricultural sector
Iranian Energy Exchange announces products to be on sale October 25
Buy/sell operations at Iran Mercantile Exchange decrease
Armenian army’s another combat UAV destroyed by Azerbaijan
Azerbaijan Air Forces destroy military equipment, infrastructure of Armenian troops
Armenian attempts to attack Azerbaijani army units suppressed
New data on Azerbaijani civil casualties, damages from Armenian attacks revealed
Azerbaijani military servicemen act within framework of int'l law - MoD
Terrorist acts against ancient city of Ganja target not only civilian population, but also historical monuments
Argentina extends COVID-19 restrictions until Nov. 8
Armenian terror walks streets of France - Lebanese legal expert
Azerbaijan confirms 220 more COVID-19 recoveries
Air Defense of Azerbaijan shoot down combat aircraft of Armenian Air Force
Reserves of Azerbaijan's Kalbajar region deposits to be re-examined, evaluated
Eight schoolchildren killed, 16 injured due to Armenian terror - Azerbaijan's Ministry of Education
Iran reveals its COVID-19 data for October 24
Azerbaijan fighting misrepresentation of its occupied territories on maps
Armenia shelling Azerbaijan’s Lachin and Gubadli districts from its territory
Import of Uzbek products into Azerbaijan increases
Value-added taxes paid by private sector down in Georgia
Volume of loans issued in Iran increases
Turkmen Ministry of Construction extends tender for construction of checkpoints
Unexploded missile on territory of Azerbaijan’s Goranboy (PHOTO)
Uzbekistan Airport announces tender for water pumps repair
Socio-economic issues in Azerbaijan - in center of attention during COVID-19 - Ali Ahmadov
Expert talks about sanctions against Armenia
Armenia must put end to attacks, illegal occupation of Azerbaijan's territory - Turkish Defense Ministry
Weekly review of events in Azerbaijani agricultural sector
Uzbekistan increases textile products manufacturing
Turkmen Health Ministry to purchase medical equipment via tender
Uzbek-Korean JV announces tender on transport services
Weekly review of Azerbaijan's precious metals market
Azerbaijan informs Russian embassy about Russian citizen killed by Armenia's attacks
Uzbek-Korean Uz-Kor Gas Chemical to buy filters via tender
Azerbaijani diaspora youth actively taking part in media fight against Armenia
Assistant to Azerbaijani president talks teenager killed due to Armenian terror (PHOTO)
Number of online payments reach record high in Georgia
Int'l financial institutions eye to provide assistance to Uzbekistan’s energy sector
Georgia’s coronavirus cases reach 26,503
Armenians barbarously exploited mineral deposits in Zangilan - Azerbaijani Ecology Ministry
Armenia at state level continues terror attacks on Azerbaijani civilians – assistant to president
Azerbaijani oil prices down
Teenager in Azerbaijan's Ganja city dies from wounds following Armenia's missile attack
Salt production growing in Turkmenistan
Uzbekistan's Ministry of Internal Affairs announces tender on equipment supply
Volumes of cargo transshipment from Algeria through Turkish ports revealed
Armenia shelling Azerbaijan’s Gubadli district by using artillery installations
Armenia's missile fire on Azerbaijan's Tartar kill 16-year old teenager - top official
Iran expects to expand oil barter with necessary goods
Azerbaijan's Naftalan, Tartar under heavy fire from Armenian troops
Georgia reveals ATM transaction statistics
Azerbaijani Armed Forces destroy military equipment of Armenia (VIDEO)
Azerbaijani Bar Association appeals to world's lawyers
Armenia's political leadership now has to take several difficult steps - Russian expert
Uzbekistan, China in talks over co-op in IT sphere
Weekly review of Azerbaijan's currency market
Armenian Armed Forces shelling settlements in Azerbaijan’s Tartar and Barda
Turkmenistan to expand its network of trading houses
Armenian armed forces firing at Azerbaijani territories in Goranboy-Naftalan direction
Armenian gov't using visit of German MPs to Nagorno-Karabakh region for propaganda
Azerbaijani president gives interview to Le Figaro newspaper (PHOTO)
OIC 'struck with astonishment' at unexpected discourse from certain French politicians
Ukraine puts Georgia on list of 'red zone' countries
Uzbekistan reveals its COVID-19 data for October 24
Turkmenistan to expand co-o with Italian company for purchase of equipment
Azerbaijan destroys Armenian strongholds, takes over important heights - MoD
Azerbaijan destroys Armenian army’s combat UAV (PHOTO)
Total assets of Bank of Baku increase
All news