SOFAZ to diversify investment portfolio
Azerbaijan, Baku, Jan. 26 / corr Trend E.Ismayilov /
The State Oil Fund of Azerbaijan (SOFAZ) is designing proposals on diversification of its investment portfolio, SOFAZ Executive Director Shahmar Movsumov said to a news conference dedicated the result of 2009.
"At present work over SOFAZ investment policy is underway. After viewing proposals at the SOFAZ Supervisory Council they will be submitted to the Azerbaijani President for approval," Movsumov said.
According to Movsumov, diversification of the investment portfolio envisages investing SOFAZ funds in highly profitable and risky financial instruments, in particular in shares.
"Increase of portfolio in shares is regarded as passive investment and it does not envisage speculative operations," SOFAZ head.
Change of the investment policy will enable the SOFAZ to attract new foreign managers to manage its funds.
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..
As of results of 2009 only 0.04 percent of investment portfolio of the funs was placed in shares.
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.
SOFAZ managers are Clarident, a member of Credit Suisse, and Deutschebank Asset Management.
Sofaz assets hit $14.900.4 billion as of Jan. 1, 2010 with an increase of 32.8 percent compared to the beginning of last year.