SOFAZ to suspend investments in traditional types of real estate

By Trend

The State Oil Fund of Azerbaijan (SOFAZ) plans to suspend investments in traditional types of real estate, such as offices, and increase the share of alternative types of real estate, including, for example, student housing and medical institutions, the Fund told Trend May 18.

SOFAZ noted that, starting from 2015, it gradually shifted its focus on investment of funds in foreign real estate, finding this type of investment the most attractive, as it increases the purchasing power and can be diversified by strategies, sectors and countries.

"In particular, we plan to suspend investments in traditional types of real estate, such as offices, and to increase the share of alternative types of real estate, including, for example, student housing and medical institutions, which are in high demand and are more stable during recessions," said the Fund.

SOFAZ also noted that the purchase of new real estate in the form of direct investments is not envisaged in the near future.

"As for the yield, since we have a diversified portfolio of investments in Europe, the US and Asia-Pacific region, we expect the yield according to the market profitability, which historically ranged from 6 to 9 percent for turnkey facilities with a stable lease," SOFAZ stated.

As of April 1, 2018, the SOFAZ investment portfolio totaled $37.63 billion or almost 100 percent of total amount of assets.

Moreover, 3.4 percent of SOFAZ investment portfolio has been placed in gold, 5.8 percent – in real estate, 14.2 percent – in shares, 76.6 percent – in bonds and other tools of monetary market.

As of April 1, 2018, SOFAZ’s assets increased by 5.1 percent as compared to early 2018 ($35.806 billion) and amounted to $37.631 billion.

SOFAZ was established in 1999 with assets of $271 million.

Based on SOFAZ's regulations, its funds may be used for construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.

The main goals of the State Oil Fund include: accumulation of resources and placement of the Fund's assets abroad in order to minimize the negative effect on the economy, the prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.