Oil fund to focus on Asian property

PUBLISHED : Wednesday, 09 October, 2013, 12:00am
UPDATED : Wednesday, 09 October, 2013, 6:37am

The State Oil Fund of Azerbaijan, the third-largest crude supplier in the former Soviet Union, will focus on Asia for its real estate acquisitions after buying property last year in London, Paris and Moscow.

Sofaz, as the fund is known, has about US$1 billion earmarked for commercial real estate in South Korea, Japan, China and Singapore, deputy executive director Israfil Mammadov said in an e-mail last week. Sofaz also planned to continue buying gold, he said.

"We are currently evaluating a number of opportunities in various Asian countries," Mammadov said. "We are hopeful that some of these investments will be made this year."

Created in 1999 to manage the Caspian Sea nation's oil and gas wealth, Sofaz had US$34.7 billion of assets on July 1, equal to almost half of the country's economy.

The government broadened the fund's mandate last year and can now hold as much as 5 per cent of its assets in real estate. Sofaz in December bought the Gallery Actor business and shopping centre in central Moscow for US$133 million. That followed the purchase of an office complex in London's West End for £177 million (HK$2.2 billion) and a retail property in Paris for €135 million (HK$1.42 billion).

"Europe, and London in particular, will always remain a target for us with its deep, liquid and transparent market," Mammadov said.

Sofaz has also been "closely watching" Istanbul's real estate market for more than a year, though it has yet to find prime commercial property in the Turkish capital that fits its investment criteria, Mammadov said. The fund will continue exploring this "expanding" market next year, he added.

Mammadov said Sofaz plans to increase its gold holdings to 30 tonnes by the end of the year and continue buying bullion in 2014 until the precious metal comprises 5 per cent of the fund's total assets.

Executive director Shahmar Movsumov said last month the fund will buy 10 tonnes of gold next year. The fund started weekly purchases of the metal in the first quarter of 2012 and held 26 tonnes as of September 26, he said. Investing in gold is a "strategic decision" to diversify assets and the fund has no plans to sell bullion, Movsumov said then.

Sofaz also plans to buy more stocks after acquiring about 3 per cent of VTB Bank, Russia's second-largest lender, for US$500 million in a secondary offering in April, Mammadov said.

"Currently, we are evaluating several investment strategies," Mammadov said.