Azeri SOFAZ to increase investment in public, private equities

07.12.2016 09:59

Azerbaijan's state oil fund SOFAZ plans to increase the proportion of public and private equities in its investment portfolio, the fund's deputy CEO said on Monday, as it further diversifies its assets.

The $35 billion fund of the oil-rich country holds the proceeds from oil contracts, oil and gas sales, transit fees and other revenue, and uses its investment proceeds to help pay for social spending and infrastructure projects.

SOFAZ submitted a proposal to the supervisory board to increase its investment in public and private equities by up to 25 percent in its portfolio, Israfil Mammadov said.

"It will be done step-by-step at the expense of fixed income," Mammadov said in an e-mailed answer to Reuters.

He said any risks related to investment in equities "could bring some volatility over the short-term but over longer term this strategy should earn higher returns because of risk-return trade-off."

SOFAZ has also been investing directly in real estate since 2012 by acquiring prime commercial properties in gateway cities in Europe and Asia Pacific.

The fund has since 2015 invested in real estate funds managed by investment firms including Blackstone, Starwood, Prudential Global Investment Management and AXA Investment Management.

"The aim of these investments is to enhance returns and reduce volatility by achieving greater diversification both geographically, but also within various real estate asset classes," Mammadov said.

Mammadov said no changes were expected in the fund's foreign currency portfolio, keeping the share of the U.S. dollar at 50 percent, the euro at 35 percent, the pound at 5 percent and other currencies at 10 percent.

He said the fund also had no plans to sell its assets in Russia, where it owns a multi-use commercial property located in central Moscow and is a shareholder in VTB bank .

"Our investment are not speculative and have long-term goals," Mammadov said.

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