Azerbaijan, Baku, March 14 / Trend E.Ismayilov /
The reason for choosing the MSCI World Index as a benchmark for investments of the State Oil Fund of Azerbaijan (SOFAZ) in shares is because of its lower exposure to the risk of price volatility, SOFAZ told Trend on Wednesday.
"Initially, we decided to take advantage of this powerful stock market index which includes more than 1600 major companies belonging to developed countries," the Oil Fund spokesperson said.
The international practice management of shares is held in two ways - by selecting any recognised stock market index and through its replication, based on passive control.
"This type of management takes place through inclusion in the Fund's investment portfolio of shares of a selected market index in the same proportion of shares as that of large, influential companies which are located in the index and is a conservative method of asset management. This is how foreign managers will manage the shares of SOFAZ," the Fund spokesperson said.
Under this new investment policy at SOFAZ, as well as diversifying the investment portfolio and improve profitability of its placement, an addition of new financial instruments, including stocks, gold and real estate in fund's investment portfolio is envisaged. At the moment, the investment policy allows the fund to invest up to five per cent of its portfolio in shares, gold and real estate respectively. However, five per cent for each of the financial instruments are the maximum limit for investments of this kind.
"In other words, the weight of the above mentioned financial instruments in the portfolio may amount to no more than 15 per cent and, given the fact that they will be added step-by-step, it is expected that their share will be below the allowable maximum level until the end of the year," SOFAZ said.
Previously SOFAZ announced attracting managers to the passive management of its portfolio of shares.
As of 2011, the total investment portfolio exceeded $29.629 billion, or 99.43 per cent of the total assets of SOFAZ. Some 0.09 per cent of these assets were placed in shares.
As of January 1, 2012, the assets of the Oil Fund amounted to $29.8 billion.