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Share of euro in Azerbaijani State Oil Fund's currency basket lowers

Oil&Gas Materials 21 July 2020 13:27
Share of euro in Azerbaijani State Oil Fund's currency basket lowers

BAKU, Azerbaijan, July 21

By Nargiz Ismayilova – Trend:

The share of the euro in the currency basket in the investment policy of the State Oil Fund of Azerbaijan (SOFAZ) for 2020 decreased from 35 percent to 20 percent, while the weight of the dollar increased from 50 percent to 65 percent, SOFAZ’s Executive Director Israfil Mammadov told Trend.

“The main reason is that long-term low or negative interest rates in the euro market, especially in the portfolio of fixed income securities, can create additional threats. Another reason is the fact that the weight of assets denominated in euros in the foreign exchange distribution of the SOFAZ investment portfolio is higher than in the corresponding authoritative indices in the international financial markets, in international foreign exchange reserves,” Mammadov noted.

SOFAZ, by investing in various financial assets and sectors, provides diversification of the investment portfolio, which, in turn, helps to mitigate the overall risks of foreign exchange funds, added the executive director.

“We would like to inform that increasing profitability while minimizing possible risks is the basis of SOFAZ's investment strategy, which constantly carries out appropriate work to improve the risk / return profile of the investment portfolio. For example, this year, we see a significant increase in the weight of higher credit-rated bonds in the fixed income sub-portfolio, accompanied by less risk of price volatility. At the same time, investments in other financial assets are made taking into account the existing market conditions,” he added.

The State Oil Fund of Azerbaijan was established in 1999, and at that time its assets was $271 million.

According to the regulation on SOFAZ, its funds can be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The SOFAZ’s main objective are: accumulation of funds and placement of the its assets abroad in order to minimize the negative impact on the economy, prevent to some extent the "Dutch disease", ensure the accumulation of funds for future generations and maintain the current socio-economic processes in the country.

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