BAKU, Azerbaijan, January 18. The State Oil Fund of Azerbaijan (SOFAZ) has announced the preliminary results of 2023 and stated that it has reached a record level of investment profitability—7.1 percent, which is an unprecedented indicator for the 24 years of SOFAZ's activity, renowned expert economist Inglab Akhmedov told Trend.
The expert noted that a more detailed analysis of the Fund's work for 2023 requires additional time and will be reflected in the detailed annual report of SOFAZ, which will be published later.
"However, by comparing the results of prior years of the Fund's operation, we can now try to understand how his team was able to attain such a high indication of investment profitability by the end of 2023," Akhmedov said.
He recalled that the Fund was established in December 1999 and initially preferred to adhere to a conservative asset management policy (investing in low-risk instruments).
"Such a policy, as a rule, does not provide an opportunity to earn more money but is mainly aimed at preserving accumulated assets," the expert explained.
According to experts, since the early 2000s and the next few years, SOFAZ has mainly invested in the debt obligations of states, international organizations, and corporations.
"Further, gaining experience, SOFAZ began to look at riskier but also more profitable ways of investing assets, in particular stocks and other instruments. Since 2013, the Fund has seriously changed its investment policy and began to practice active investments in real estate, shares of various companies, and gold," Akhmedov said.
At the same time, according to the expert, their shares in the fund's assets were small—five to ten percent each. "Later, the share of new instruments gradually began to grow, and today the total share of investments in stocks, real estate, and gold is 42.3 percent," Akhmedov said.
Expert-economists noted that if we compare SOFAZ's investment portfolio in 2022 and 2023, then in 2023 the share of the Fund's main investment instrument, debt obligations, decreased to 57.7 percent from 62.1 percent in 2022. But stocks accounted for 24.3 percent of the investment portfolio in 2023, compared with 19.6 percent in 2022, and this is a breakthrough.
"Thus, SOFAZ, as can be seen, following the recommendations of reputable managers of a part of the Fund's portfolio abroad, is gradually increasing risky but highly profitable operations. The fact that the fund received record investment returns in 2023 shows that it is on the right road," the expert stressed.
As for forecasts, according to Akhmedov, much will depend not only on the activities of the Fund itself but also on the situation of the global stock market, because the global market situation is still unstable due to geopolitical, financial, and other reasons.
"The record yield of 7.1 percent in 2023 indicates the effective work of such a relatively young fund as SOFAZ and its team, which successfully learns from experienced players and works more confidently yearly. I hope that the growth of profitability from asset management will become a stable trend in SOFAZ's activities," he added.
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