Azerbaijan’s Oil Fund may transfer up to 60% of its investment portfolio to foreign managers
Baku, Fineko/abc.az. Azerbaijani President Ilham Aliyev approved the main directions (program) of the State Oil Fund of Azerbaijan (SOFAZ) for 2013.
SOFAZ investment program 2013 composes the following areas of expenditure:
financing of activities related to social welfare issues and accommodation of refugees and IDPs; transfer to the state budget; financing for the project of reconstruction of the Samur-Absheron irrigation system; funding for the project of new railway Baku-Tbilisi-Kars; financing of the State Program on education of Azerbaijan youth abroad in 2007-15; funding for the project of high-speed fiber-optic network, providing the opportunity of access to all settlements in Azerbaijan; financing of Azerbaijan’s equity stake in the construction of oil & gas and petrochemical complex; financing of Azerbaijans participation in the construction of oil refining complex Star in Turkey; financing of Azerbaijan’s stake in project TANAP; financing of Azerbaijan’s stake in the construction of a new modern drilling rig in the Caspian Sea.
SOFAZ investment policy 2013 aims to achieve maximum returns with a low risk of capital loss. At that, the projected total cost (the weighted average amount) of the Fund’s investment portfolio on 2013 is taken equal to AZN 25.2 bn. Total cost of the investment portfolio is set based on monthly revaluation in assets denominated in foreign currency, after deducting of convertible and transfer of finances for expenditures to manat accounts, approved in the SOFAZ budget.
The base currency of the investment portfolio is traditionally U.S. dollars, in which 50% of the total value of the SOFAZ investment portfolio can be placed. Another 40% of the portfolio is placed in euro, and 5% in pound sterling, and the remaining 5% in other currencies.
Oil Fund’s overall investment portfolio consists of the following portfolios:
- A portfolio of debt and money market instruments - at least 85% of the total value of the investment portfolio;
- A portfolio of stocks - a maximum of 5% of the total value of the investment portfolio;
- A portfolio of real estate - a maximum of 5% of the total value of the investment portfolio;
- Gold portfolio - a maximum of 5% of the total value of the investment portfolio.
The benchmark of the investment portfolio in 2013 - the three-month LIBOR benchmark for the relevant currency (except the euro). In managing the euro-denominated assets of the portfolio of debt and money market instruments, three-month benchmark EURIBOR is taken as the benchmark. Benchmarks on three-month loans, which are the most common among the banks, are used on the financial market as the target return on currencies in which there is no rate LIBOR. Index MSCI World is taken as the benchmark on the equity portfolio.
The actual weighted average investment term of debt portfolio (duration) of the Oil Fund is set by the Fund depending on the current situation in the world markets, and must not exceed 48 months. Maximum share of one financial institution (except depository banks) or one of the investment assets in the portfolio is set at 15% of the total value of the investment portfolio.
The degree of liquidity of the Oil Fund’s finances should be at a sufficient level to ensure full and timely implementation of Fund’s planned cash and other transfers on budget expenditures. In order to provide this level the part of the Oil Fund’s finances in the amount of at least $100 million must be stored in short-term money market instruments with high liquidity. The period when these finances are less than this amount should not last more than 7 working days.
The total amount of funds provided to the management of foreign managers, should not exceed 60% of the total value of the investment portfolio, and the maximum amount of funds made available to the management of a foreign manager, - 5% of the total value of the investment portfolio. Volume of Oil Fund granted to the management of the Treasury of the World Bank as part of RAMP should not to exceed $500 million.
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