Baku, Azerbaijan, Aug. 21
By Maksim Tsurkov – Trend:
As of early 2017, profitability of the State Oil Fund of Azerbaijan (SOFAZ) on tradable stocks was 12.18 percent, SOFAZ told Trend, Aug. 21.
According to the Fund, SOFAZ strives to create the most balanced global portfolio by increasing the share of more risky assets in the long-term investment period.
“To this end, the Fund gradually increases the share of financial instruments, including stock assets, that promise a relatively high profit. Among institutional investors, such as pension funds, insurance companies, sovereign funds and others, the process of investing in assets is mostly taking place through investments in indexes, where the share of assets of certain companies depends on their market capitalization,” said SOFAZ.
This process can be carried out by either active or passive investing, added the Fund.
To ensure access to the markets of publicly traded stocks, SOFAZ chose the path of passive investing in highly diversified indexes, which, at the moment, proved to be the most optimal approach to the indexation in concern of the risk to profitability ratio, as well as the analysis of benefits and related costs, said the Fund.
According to the Fund, this type of investment is considered to be effective in the long term, since it is characterized by a relatively high volatility, which means significant short-term downfalls and rise in profitability.
“Since the beginning of stock investments, as of late 2016, SOFAZ’s profitability on tradable shares at an annual rate was 12.18 percent. Moreover, SOFAZ also invests in private equity funds, the purpose of which is to increase the portfolio’s returns and obtain diversified access to the shares of companies that aren’t traded in the open securities markets,” said SOFAZ.
SOFAZ was established in 1999 with initial assets of $271 million. As of 1H2017, assets of SOFAZ have increased by 4.96 percent, as compared to early 2017 ($33.147 billion), and totaled $34.79 billion.
Based on SOFAZ’s regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as in the resolution of the major national problems.
The main goals of the State Oil Fund include: accumulation of resources and placement of the Fund’s assets abroad for minimization of the negative effects on the economy; prevention of “Dutch disease” to some extent; promotion of resource accumulation for the future generations and the support of current social and economic processes in Azerbaijan.
---
Follow the author on Twitter: @MaksimTsurkov