State Oil Fund of Azerbaijan receives permission to invest in assets of Russia and Turkey
Azerbaijan, Baku, Oct. 27 /Trend, I.Khalilova/
President of Azerbaijan Ilham Aliyev signed an order on Oct. 27 expaning the list of countries in assets of which the investment portfolio of the State Oil Fund of Azerbaijan (SOFAZ) can be placed. Russia and Turkey were also named in the list.
Upon Presidential order, relevant amendmends have been made to the regulations on storage, placement and management of funds of the SOFAZ, adopted on June 19, 2001.
Previously, the funds could be placed in the assets of the G7 - the U.S., Germany, United Kingdom of Great Britain and Northern Ireland, France, Italy, Canada and Japan, the EU countries, as well as in assets denominated in currencies of countries with long-term credit rating not less than "A" (Standard & Poors and Fitch) or "A2" (Moodys). Investments in assets denominated in currencies of countries that are not included in this list can be implemented in case of minimizing the risk of exchange rate of these currencies in relevant to the dollar.
The amendments to the regulations also clarified the requirements to foreign managers, involved in the State Oil Fund investment portfolio management. In particular, the funds can be managed by foreign manager, credit rating of which or its main founder is not less than investment level (Standard&Poors, Fitch or Moodys), or it must have at least five years of positive practice in management of assets or experience in managing assets worth at least $1 billion.
The SOFAZ funds can be placed:
- in deposits in the central and commercial banks and other financial institutions
- debt securities with an investment credit rating (Standard & Poors, Fitch or Moodys) of states, governmental agencies, international financial institutions, commercial organizations and other entities
- debt securities with the investment credit rating (Standard & Poors, Fitch or Moodys),
- shares in the internationally recognized indices of equity markets,
- shares of joint-stock funds, including alternative investment funds
- gold bars conforming to the requirements of the London Bullion Market Association,
- in real estate
- Up to five percent of the total cost of the investment portfolio may be invested in deposits of institutions or securities having a rating of non-investment grade, but not below the rating of "BB-" (Standard & Poors and Fitch) or "Ba3" (Moodys). In this case, banks and other financial institutions providing depositiory services to SOFAZ or partners on opening an account for funds of SOFAZ may also have non-investment rating, but their credit rating should not be lower than "BB-" (Standard & Poors and Fitch) or "Ba3" (Moodys).
In accordance with the main directions for use of SOFAZ funds in 2011, the currency composition of the investment portfolio seems to be as: 50 percent of the assets can be placed in U.S. dollars, 40 percent in euro and five percent in British pounds sterling. The remaining five percent of the total cost of the investment portfolio may be placed in the currencies of countries with long-term ratings of "A" (Standard and Poor's) and "A2" (Moody's), or in dollar, euro and pound sterling.
SOFAZ may transfer up to 60 percent of its investment portfolio to the management of foreign managers, but one manager can not manage more than 15 percent of the total portfolio.
Under the program, the total investment portfolio of SOFAZ for 2011 is projected at 19.4 billion manat.
No more than $600 million of SOFAZ funds may be invested in projects on development of the mining industry in the Caspian Sea or in the securities of the main founders having long-term investment rating.
Official exchange rate on Oct. 27 is 0.7869 AZN/USD.