Next year SOFAZ to transfer 60% of portfolio to managers and start investment in soft currency, gold and real estate
Baku, Fineko/abc.az. The Investment Program (directions of spending) of the State Oil Fund of Azerbaijan (SOFAZ) for 2012 was approved by a decree of President Ilham Aliyev from 29 December, endorsing the SOFAZ budget.
The investment program includes spending of SOFAZ finances on transfer to the State Budget (the Fund’s budget allows spending AZN 9.905 bn for that), construction of the Georgian section of Baku-Tbilisi-Kars railway AZN 252.48 million, construction of Samur-Apsheron water supply system (AZN 200 million), education of young Azerbaijanis abroad (AZN 20 million).
Under the Program, its main purpose is to maximize the protection of the Fund from capital loss risk. The average level of SOFAZ investment portfolio will amount to AZN 23 bn ($29.1 bn) in 2012. At that, it will be carried out monthly revaluation of the SOFAZ investment portfolio after expenditures on converting its assets in Azerbaijani manats.
The basket of currencies of the Fund’s investment portfolio for 2012 was endorsed with the following structure: 50% in U.S. dollars, 40% in euros, and 5% in British pounds. Another 5% can be invested in other currencies (Turkish Lira, Russian Ruble, etc.).
A set of tools in the investment portfolio structure was adopted in the following proportion: 85% of the finances can be placed in bonds and money market instruments and by 5% in stocks, real estate and gold.
In this case, the target rate of return on debt and monetary instruments should not be lower than the rate of 3-month LIBOR and 3-month EURIBOR, if speech is about euro. As for shares, target rate of return (benchmark) should be at least at the level of MSCI World Index. The SOFAZ is prohibited to acquire debentures with a period of more than 48 months.
In its investment practice for 2012 the SOFAZ should not allow the placement of over 15% of its portfolio in one bank or in one investment.
The Fund is also obliged to ensure full liquidity of its investments. At that, at least $100 million must be in short-term money market instruments with placement of not more than 7 days.
The SOFAZ received the right to transfer up to 60% of its investment portfolio under management of foreign managers, including at least 5% of portfolio for one manager. At that, up to $500 million is transferred to the World Bank’s program RAMP.
The Fund’s budget for 2012 was approved with revenue of AZN 10.697 bn and expenditures of AZN 10.56 bn. As a result, the SOFAZ budget surplus is expected at AZN 135.726 million or 1.27% of its expected revenues. The budget was passed with oil export price forecast of $80 per barrel.
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