What Is the State Oil Fund of the Republic of Azerbaijan (SOFAZ)?
The period of time State Oil Fund of the Republic of Azerbaijan (SOFAZ) refers to a sovereign wealth fund (SWF) established in the course of the Republic of Azerbaijan. The fund was once presented in December 1999 after the president signed a decree. The fund, which invests the country’s oil and gasoline revenues for long term generations, is overseen via a unique board that is led in the course of the rustic’s president. As of June 2022, the fund had about $45.3 billion in assets.
Key Takeaways
- The State Oil Fund of Azerbaijan is a sovereign wealth fund established via the government of Azerbaijan.
- It manages oil and gasoline agreements right through the rustic and people who gain resources.
- The fund invests in quite a lot of asset classes in every single place the sector to multiply wealth derived from oil.
- The sovereign wealth fund makes maximum usually conservative fixed-income and money-market investments and as well as diversifies its holdings to include gold, exact assets, and equities.
- Just about all the fund’s holdings are allocated to Europe, Asia, and North The united states.
Figuring out the State Oil Fund of the Republic of Azerbaijan (SOFAZ)
The State Oil Fund of the Republic of Azerbaijan was once established on Dec. 29, 1999, via President Heydar Aliyev. It is the result of a national oil and gasoline methodology put in place in the course of the national leader in 1994. The fund, which is primarily based completely in Baku, Azerbaijan, sees its provide of deposits as principally surplus revenues from the development of the country’s oil and gasoline reserves.
In keeping with the fund’s web site, its main goals are to:
- Stay the rustic’s monetary gadget, keep disciplined on a fiscal-tax basis, scale back the country’s dependence on energy revenues, and stimulate other sectors inside the monetary gadget
- Prepare and distribute the country’s oil wealth in a similar fashion, along with care for revenues from energy property for long term generations
- Use the fund to finance large duties to be informed the rustic
The fund had $45.3 billion in assets, which may well be invested in more than a few asset classes. The aim is to maximize its long-term returns. The most recent breakdown of the fund’s portfolio is as follows:
Europe and Asia constituted just about 53% of the oil fund’s holdings in the course of the tip of 2020. The fund moreover reported about 25% of its investments in North The united states, 1.1% inside the Middle East, and 1.16% in Australia. Very best 0.04% of its investments have been consistent in South The united states.
Even supposing this sovereign wealth fund is ultimately accountable to Azerbaijan’s president, it is straight away overseen in the course of the supervisory board. This entity is made up of government our our bodies and public organizations, along side the prime minister and the chair of the country’s central monetary establishment. The fund’s day-to-day operations and keep watch over, along side any decision-making is the obligation of the executive director, who is appointed in the course of the rustic’s president.
The Norway Government Pension Fund is a very powerful sovereign wealth fund in the world with more than. $1.34 trillion in assets, followed via China Investment Corporate with $1.22 trillion in assets. SOFAZ ranks inside the twenty 8th spot numerous the worldwide’s largest SWFs.
Specific Issues
In keeping with the fund’s annual file, oil production accounted for 29.9% of Azerbaijan’s gross house product (GDP) compared to 70.1% from non-oil-related sectors. This highlights Azerbaijan’s reliance on oil production as a provide of prosperity.
In an effort to be in agreement diversify the Azerbaijani monetary gadget, the primary serve as of SOFAZ is to care for the wealth derived from this oil production and to spend money on public infrastructure and the local non-oil monetary gadget.
