State Oil Fund of Azerbaijan

The State Oil Fund of the Republic of Azerbaijan (SOFAZ) is Azerbaijan's sovereign wealth fund, whereby energy-related earnings are accumulated and efficiently managed for future generations.
History.
SOFAZ was established in accordance with the Decree of National Leader Heydar Aliyev No. 240 on December 29, 1999. Statute of SOFAZ was approved by the Decree of the President of the Republic of Azerbaijan No. 434 dated December 29, 2000. SOFAZ began operating after the approval of the Decree on "Rules on management of foreign currency assets of the State Oil Fund of the Republic of Azerbaijan" by the President of the Republic of Azerbaijan dated June 19, 2001. The establishment of SOFAZ plays a key role in the oil strategy founded by Azerbaijan's National Leader Heydar Aliyev.
Goals and objectives.
SOFAZ was founded in order to manage the oil and gas incomes efficiently as well as to invest them in the development of socio-economically important projects and advance spheres.
SOFAZ's activity is directed to the achievement of the following objectives:
1.Supporting macroeconomic stability, participating in ensuring fiscal-tax discipline and decreasing dependence on oil revenues while stimulating development of the non-oil sector;
2.Funding major national scale projects to support socio-economic progress;
3.Ensuring intergenerational equality with regard to the country's oil wealth, accumulating and preserving oil revenues for future generations.
Management.
The Supervisory Board, consisting of representatives of the state authorities and public organizations, carries out general oversight of SOFAZ's operations. The Board reviews and evaluates SOFAZ's draft annual budget, annual report and financial statements, along with audit report. Members of the Supervisory Board are approved by the President of the Republic of Azerbaijan. The board members act entirely on a voluntary basis.
SOFAZ's day-to-day activities are managed by the Executive Director appointed by the President of the Republic of Azerbaijan.
The Executive Director represents the Fund, appoints and dismisses employees of SOFAZ in a manner determined by the legislation, carries out operational management of SOFAZ's activities, ensures the management and investment of SOFAZ's assets in accordance with the Guidelines approved by the President of the Republic of Azerbaijan. 
Execution of SOFAZ's budget is implemented on the basis of comments provided by the Supervisory Board in accordance with the SOFAZ budget approved by the proper Ordinances of the President of the Republic of Azerbaijan. SOFAZ assets are managed in accordance with the "Rules on management of foreign currency assets of the State Oil Fund of the Republic of Azerbaijan" and Investment Policy.
SOFAZ’s revenues.
The sources of income for SOFAZ are:
SOFAZ’s expenditures.
In compliance with regulations relating to SOFAZ, the Fund's assets may be used for solving major problems affecting the nation, and for construction and reconstruction of strategically important infrastructure to support socio-economic progress.
Transfers to the state budget also constitute a significant component of the Fund's outflow. A very small portion of the Fund's assets is utilized to cover operational costs.
As per the Law "About Budget System" of the Republic of Azerbaijan, all SOFAZ expenditures, except operating expenditures, are incorporated as part of an annual consolidated government budget presented to the Parliament for approval. In compliance with this Law, SOFAZ can only execute expenditures envisaged by its budget.
Projects financed by SOFAZ.
SOFAZ is funding projects of national scale. They are:
1.Azerbaijan's equity share in the Baku-Tbilisi-Ceyhan Baku-Tbilisi-Ceyhan (BTC) oil pipeline project (completed);
2.Building of housing and improvement of socio-economic conditions of refugees and internally displaced persons who were forced to flee their native lands as a result of Armenian-Azerbaijan conflict;
3.Oguz-Qabala-Baku water supply system (completed);
4.Reconstruction of the Samur-Absheron irrigation system (completed);
5.Formation of the statutory capital of the State Investment Company (completed);
6.Financing Baku-Tibilisi-Kars railway (completed);
7.Financing “The state program on the education of Azerbaijan youth abroad in the years 2007-2015” (completed);
8.Financing of the share of Azerbaijan Republic in the construction of the STAR oil refinery project in Turkey;
9.Financing the share of the Republic of Azerbaijan in “South Gas Corridor” CJSC statutory capital;
10.Financing the share of Azerbaijan Republic in the “Construction of New Semi-submersible Drilling rig Project” (completed)
11.State Program on Raising Competitiveness of Higher Education in Azerbaijan in 2019-2023.
Asset management.
SOFAZ's assets are managed in accordance with the "Rules on management of foreign currency assets of the State Oil Fund of the Republic of Azerbaijan" approved by Presidential Decree No. 511 dated June 19.2001 and “Investment Policy of the State Oil Fund of the Republic of Azerbaijan” approved by Presidential decrees on an annual basis.
According to Investment Policy currency composition of the investment portfolio is as follows, subject to the requirement of at least 90% allocation to currencies of countries with credit ratings of no less than “A” (by Standard and Poor's, Fitch) and “A2” (by Moody's):
1. 65% in assets denominated in USD;
2. 20% in assets denominated in EUR;
3. 5% in assets denominated in GBP; and
4. up to 10% in assets denominated in other currencies.
Investment portfolio of SOFAZ consists of the following sub-portfolios:
1. Debt obligations and money market instruments sub-portfolio (excluding investments in non-rated debt funds) – 50% of the investment portfolio along with maximum lower deviation of 5% ;
2. Equity sub-portfolio – up to 25% of the investment portfolio (including up to 5% with maximum upper deviation of 2% in private equity funds and non-rated debt funds, as well as, co-investments in private equity);
3. Real estate sub-portfolio – up to 10% of the investment portfolio along with maximum upper deviation of 2% (including direct real estate, real estate funds and non-rated real estate debt funds);
4. Gold sub-portfolio – up to 15% of the investment portfolio along with maximum upper deviation of 3%.
Assets.
The assets of SOFAZ as of April 1, 2021 constituted US$42 761.3 mln.
SOFAZ's budget revenues for the period of January–March, 2021 reached AZN 3 182.1 million, while budget expenditures constituted AZN 2 519.9 million.
SOFAZ - Sovereign Wealth Fund.
A Sovereign Wealth Fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments that is formed from revenues from natural resources. The term sovereign wealth fund was first used in 2005. The International Working Group of Sovereign Wealth Funds (IWG) announced its establishment in April 2009 in the city-capital of Kuwait.
SOFAZ cooperates with other SWF's within the framework of International Forum of Sovereign Wealth Funds (IFSWF). IFSWF is a voluntary group of SWFs, which meets, exchanges views on issues of common interest, and facilitates an understanding of the Santiago Principles and SWF activities. The inaugural meeting of IFSWF was held in Baku on October 8–9, 2009 and it was hosted by SOFAZ and the Government of the Republic of Azerbaijan.
References.
https://www.oilfund.az/en
https://www.ifswf.org/