State Oil Fund of the Republic of Azerbaijan (SOFAZ)
What Is the State Oil Fund (Azerbaijan)?
The term State Oil Fund of the Republic of Azerbaijan (SOFAZ) alludes to a sovereign wealth fund (SWF) laid out by the Republic of Azerbaijan. The fund was sent off in December 1999 after the president marked a decree. The fund, which invests the nation's oil and gas revenues for people in the future, is managed by a special board that is driven by the nation's leader. As of June 2022, the fund had about $45.3 billion in assets.
Understanding the State Oil Fund of the Republic of Azerbaijan (SOFAZ)
The State Oil Fund of the Republic of Azerbaijan was laid out on Dec. 29, 1999, by President Heydar Aliyev. It is the consequence of a national oil and gas strategy put in place by the national leader in 1994. The fund, which is situated in Baku, Azerbaijan, sees its source of deposits as essentially surplus incomes from the development of the nation's oil and gas reserves.
As per the fund's website, its primary objectives are to:
- Save the nation's economy, stay trained on a monetary expense basis, cut back the country's reliance on energy incomes, and animate other sectors in the economy
- Oversee and circulate the nation's oil wealth similarly, as well as protect incomes from energy sources for people in the future
- Utilize the fund to finance large activities to benefit the nation
The fund had $45.3 billion in assets, which are invested in a number of asset classes. The aim is to boost its long-term returns. The latest breakdown of the fund's portfolio is as per the following:
- Fixed income and money market: 63.8%
- Equities: 15.9%
- Gold (a total of 101.8 tons): 14.2%
- Real estate: 6.1%
Europe and Asia comprised practically 53% of the oil fund's holdings toward the finish of 2020. The fund additionally reported around 25% of its investments in North America, 1.1% in the Middle East, and 1.16% in Australia. Just 0.04% of its investments were fixed in South America.
Albeit this sovereign wealth fund is at last accountable to Azerbaijan's leader, it is straightforwardly administered by the supervisory board. This entity is comprised of government bodies and public organizations, including the prime pastor and the chair of the country's central bank. The fund's everyday operations and management, along with any navigation is the responsibility of the executive director, who is designated by the nation's leader.
The Norway Government Pension Fund is the largest sovereign wealth fund in the world with more than. $1.34 trillion in assets, trailed by China Investment Corporation with $1.22 trillion in assets. SOFAZ positions in the 28th spot among the world's largest SWFs.
Special Considerations
As indicated by the fund's annual report, oil production represented 29.9% of Azerbaijan's gross domestic product (GDP) compared to 70.1% from non-oil-related sectors. This features Azerbaijan's dependence on oil production as a source of thriving.
To assist with expanding the Azerbaijani economy, the primary purpose of SOFAZ is to protect the wealth derived from this oil production and to invest in public infrastructure and the neighborhood non-oil economy.
Features
- The majority of the fund's holdings are allocated to Europe, Asia, and North America.
- The fund invests in different asset classes all through the world to duplicate wealth derived from oil.
- The State Oil Fund of Azerbaijan is a sovereign wealth fund laid out by the government of Azerbaijan.
- The sovereign wealth fund makes for the most part conservative fixed-income and money-market investments and furthermore broadens its holdings to incorporate gold, real estate, and equities.
- It oversees oil and gas agreements inside the nation and the people who purchase resources.
