Azeri oil fund to lift investments in equities, Asian property

Mon Dec 16, 2013 8:21pm IST

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* To double proportion of portfolio invested in equities

* Plans to buy real estate in Asia

* To raise share of dollar in currency portfolio, cut euro

By Margarita Antidze

TBILISI, Dec 16 (Reuters) - Azerbaijan's state oil fund plans to double the proportion of equities in its investment portfolio and buy real estate in Asia next year, the fund's executive director told Reuters, as it further diversifies its assets.

The $34 billion fund of increasingly wealthy Azerbaijan holds proceeds from oil contracts, oil and gas sales, transit fees and other revenues, and uses investment proceeds to help pay for social spending and infrastructure projects.

"The state oil fund plans to increase the amount of equities in its investment portfolio to 10 percent from the current 5 percent at the expense of a decline in the amount of bonds to 80 percent," Shakhmar Movsumov said in e-mailed comments.

"The fund will continue to increase the share of real estate outlets in its investment portfolio ... We are now considering concrete proposals on investment in commercial property on the Asian market."

The fund spent $600 million on real estate in Europe in 2012, buying office blocks in central London and Paris and a shopping complex in Moscow.

It also invested $600 million in shares of major foreign companies in the MSCI World Index in 2012 and started to invest in funds run by the International Finance Corporation (IFC), including $100 million in the IFC fund in Africa and Latin America (ALAC), $50 million in its climate fund and $150-$200 million in the Global Infrastructure Fund.

Movsumov said the fund would also change its foreign currency portfolio next year, decreasing the share of the euro to 35 percent from the current 40 percent and increasing the share of the U.S. dollar that currently stands at 50 percent.

Movsumov said the fund did not rule out the possibility of buying Chinese yuan, although strict investment regulations in China might delay that process.

"This process takes some time and we are now working with regulation bodies in China on completion of all necessary procedures to start investment in this country," he said.

The fund said this month it had invested $475 million to help construction of the new Star oil refinery in the west of Turkey. It will provide another $300 million next year for the $5 billion project, which aims to start production in mid-2017 with an annual crude processing capacity of 10 million tonnes.

The Azeri state oil fund approved a 2014 budget last month based on an estimated oil price of $100 per barrel, the same as this year. The budget sees revenues of 11.6 billion manats ($14.5 billion) and spending of 11.4 billion manats.

($1=0.8 manats) (Writing by Margarita Antidze; Editing by Mark Potter)

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