Azerbaijan oil fund may increase investment in bonds, shares in China

The $35 billion Sofaz sovereign wealth oil fund holds proceeds from oil contracts, oil and gas sales, transit fees and other revenue. It uses income from investments to pay for social spending and infrastructure projects.

"SOFAZ is considering options to increase its investment in China ... including investment in Chinese bonds and other financial instruments, including shares," the senior fund official, who did not want to be named, told Reuters.

He said one of the reasons for this was a recent decision by the International Monetary Fund to confirm Chinese yuan as a reserve currency and include it in SDR basket.

SOFAZ bought 3 billion yuan ($464.84 million) worth of Chinese bonds denominated in yuan in July, saying the purchase was designed to diversify its currency exposure.

A SOFAZ official had said in June that the fund would continue to diversify its real estate portfolio, which includes commercial assets across European and Asia-Pacific markets.

It made its first real estate investment in Japan in September, buying the retail property Kirarito Ginza in Tokyo for 52.3 billion yen with Mitsubishi UFJ Trust and Banking Corporation.