Azerbaijan passes on buying Saudi Arabian Oil Company shares
Baku, Azerbaijan, Aug. 30
By Azad Hasanli – Trend:
The State Oil Fund of Azerbaijan (SOFAZ) has decided not to purchase Saudi Arabian Oil Company’s shares, further explaining the reason why.
SOFAZ has no plans to participate in the purchase of shares of the Saudi Arabian Oil Company (Saudi Aramco), the fund told Trend Aug. 30.
The government of Saudi Arabia in early 2018 intends to hold an initial public offering (IPO) of shares of the Saudi Aramco company and attract about $100 billion through the sale of five percent of its shares. The IPO of the Saudi Aramco’s shares is a part of initiative by Saudi Deputy Crown Prince Mohammad bin Salman for the economy’s adaptation to the post-oil era.
Earlier, SOFAZ executive director Shahmar Movsumov explained why the fund invests in shares less than in other assets. 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.”
“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,” he said. “But as I have already mentioned, we will continue increasing the share of these assets in the common portfolio.”
As of July 1, 2016, SOFAZ's assets amounted to $35.1 billion. SOFAZ was established in 1999 with assets of $271 million.
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 effect 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.