n recent years, in order to create the most diversified global portfolio, as well as to increase profitability in the long-term investment period, the Fund is gradually increasing the share of more risky assets such as stocks and real estate.
"It should be noted that at the moment our investment portfolio is highly diversified not only at the level of types of assets, but also at the currency level. To date, the portfolio includes financial instruments denominated in approximately 20 currencies. In addition, the geographical diversification is also one of the key areas of the Fund's investment strategy. Thus, at the moment, the investments are spread across more than 45 countries", SOFAZ noted.
The Fund intends to continue passive investing in highly diversified indices.
"For example, the "MSCI World" index includes more than 1,600 shares of large and medium-sized companies in 23 developed countries, widely representing the developed financial markets. It is worth noting that the effectiveness of this type of investment is usually considered in the long term, as it is characterized by relatively high volatility, which means significant short-term declines and growth in profitability," SOFAZ said.
Regarding real estate, the strategy provides for the creation of a fully diversified sub-portfolio, in which the developed markets, as well as various types of real estate are widely represented, the Fund stated.
"For example, as mentioned earlier, for as long as three years, the Fund has already been gradually redirecting the focus on investment in foreign real estate funds, finding this type of investment the most attractive, as they increase purchasing power and can be diversified by strategies, sectors and countries. It should be noted that further investments in a particular financial instrument, expressed in the local currency of that or other country, will depend on the analysis of financial markets and economies of these countries", SOFAZ noted.
As for investments in gold, the Fund will continue to adhere to the five percent limit specified in the investment policy, SOFAZ stressed.
The projected total value (weighted average volume) of SOFAZ's investment portfolio for 2018 is determined at the level of 60.67 billion manats.
At the same time, SOFAZ's investment portfolio may consist of four sub-portfolios: the portfolio of debt obligations and money market instruments – 60 percent of the total portfolio value (the Fund may invest a maximum of five percent in debt obligations of mutual investment funds that do not have a credit rating), the portfolio of shares – 25 percent (in which case a maximum of five percent can be invested in shares of mutual investment funds), real estate portfolio – 10 percent, gold portfolio - 5 percent.
The currency structure of SOFAZ's investment portfolio is as follows: up to 50 percent of assets can be denominated in US dollars, 35 percent – in euros, five percent – in British pounds, 10 percent – in other currencies.
The State Oil Fund was established in 1999, and at that time its assets amounted to $271 million.
In the first half of 2018, the SOFAZ’s assets have increased by 6.22 percent compared to the beginning of this year ($35.806 billion), amounting to $38.036 billion.
According to the regulations on the State Oil Fund, the Fund's assets can be used for the construction and reconstruction of strategically important infrastructure facilities, as well as for solving important national problems.
The main objectives of SOFAZ are: accumulation of funds and placement of the Fund's assets abroad in order to minimize the negative impact on the economy, to prevent to some extent the "Dutch syndrome", the accumulation of funds for future generations and maintenance of the current socio-economic processes in the country.
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