Sofaz plans to spend $1b on property in Asia, Australia

Azerbaijan's state oil fund plans to spend about $1 billion on real estate abroad, mainly in Asia and Australia, the fund's deputy CEO said, as it further diversifies a broad portfolio of foreign 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 the proceeds of investments to help pay for social spending and infrastructure projects.

"We are at advanced stage of negotiations (over buying property abroad)," Israfil Mammadov told Reuters in an interview on Monday.

"We would be lucky if we manage to deploy $1 billion within this year and find all suitable properties in 2014." He named Singapore, Japan, South Korea and Australia as countries of interest.

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).

Mammadov said the fund would continue to invest in shares.

EYES ON YUAN

The fund also hopes to complete the process of getting permission from Chinese authorities to buy yuan, diversifying its foreign currency portfolio.

"We are very keen to complete this process this year and we are quite optimistic that our colleagues in China will look at our application positively," Mammadov said.

Half of the fund's foreign currency portfolio consists of dollars, while the euro's share stands at 35 percent. Other currencies it holds includes the Turkish lira and rouble.

The fund does not intend to continue buying gold abroad at this stage, Mammadov said. Its gold reserve is 30 tonnes right now, which is held in JP Morgan storage facilities in London.

Mammadov said the fund, which expects revenue of 11.6 billion manats ($14.5 billion) this year, would continue to finance energy projects.

They include the construction of a refinery in Turkey, a drilling rig on the Caspian Sea and the $8 billion Trans-Anatolian natural gas pipeline project (TANAP) to take Azeri gas to Turkey and to markets in Europe.

(Reuters)

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