SOFAZ Speaks in Russian

SOFAZ Speaks in Russian

CESD:  Purchasing of “VTB Bank” s shares is a political message

State Oil Fund of Azerbaijan bought additional share emission of VTB Bank, Russia. The volume of the issue is RR 102.5 billion (quantity – 2.5 trillions, face value – RR 0.041). The emission has already been registered by Russian Bank.

CESD argues that purchasing of “VTB Bank” s shares should be considered as a political decision, “it is a political message. SOFAZ wants to show Azerbaijani interest in economic cooperation with Russia although Fund’s invests in Russia’s banking sector  is less risky policy. Because of the higher share of the Russian government in the bank. In this case, the bank’s bankruptcy is likely to be almost there. Therefore, a relatively risk-free investment is observed, however,   it is necessary to take into account that working with the Russian stock market is not profitable for long-term period. It should be reminded here that SOFAZ invested RUB 3 billion (USD 100 million approximately) into the short term deposit at one of the biggest banks in Russia, Gazprombank On October 19, 2012. That time,  Israfil Mammadov, Chief Investment Officer of SOFAZ, announced that this is the first step in long term investment strategy into assets denominated in Russian Ruble and Fund plans further investments in other financial instruments in future. ”

CESD experts underlines that SOFAZ’s investment policy is inefficient. SOFAZ purchased 15 tons gold in 2012 and additional 15 tons is planned to acquisition in 2013.  The price for gold has fallen 11,0 % since “SOFAZ’s gold business”. 1 oz of gold is $ 1470 in the world market, now.  In fact, CESD proposed that the Oil Fund keep at least one part of its assets in gold in 2009. At that time it was not prudent to keep the assets in foreign currency. On the contrary, gold was the most profitable investment during the global economic crisis. In this regard, keeping some assets in gold has been always reliable. Unfortunately, the Oil Fund didn’t decide to keep assets in gold. Buying gold last year is considered as a delayed decision.

According to the opinion of the economist, the investment policy of the Oil Fund shows that the current processes at SOFAZ do not have flexible decision-making. Practically speaking, in most cases the management of the Oil Fund’s assets generates minimal real income.

CESD, 2013


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