Azerbaijani Chamber of Accounts calls for strategic coordination and portfolio adaptation at SOFAZ

The Chamber of Accounts recommended that the State Oil Fund (SOFAZ) strengthen coordination with the State Oil Company (SOCAR) and Azerbaijan International Operating Company (AIOC).

Azernews reports that this recommendation is included in the Chamber's Opinion on the implementation of the Fund's 2023 budget.

"The document noted discrepancies between Azerbaijan's share of hydrocarbon production forecasts and performance indicators, emphasizing the need for enhanced coordination with SOCAR and AIOC in determining production forecasts."

The Chamber of Accounts proposed that SOFAZ establish a new liquid portfolio.

"Given increased uncertainty in currency auctions, timely fulfillment of obligations (transfers to the state budget), additional costs (purchase costs, realization of potential losses), and risks (difficulties in meeting benchmarks), creating a new liquid portfolio to manage liquidity corresponding to potential demand within the sub-portfolio is deemed appropriate," the document stated.

"Due to the differing characteristics of private equity investments (liquidity, long-term holding) compared to shares, consideration should be given to segregating the private equity sub-portfolio from SOFAZ's general equity portfolio and placing it in a separate sub-portfolio."

Furthermore, the Chamber emphasized the need to finalize benchmarks that fully reflect the Fund's objectives for private equity investments, considering their illiquid nature.

"Given the time required to construct targeted sub-portfolios, as well as efforts to select and approve suitable benchmarks, final approval of benchmarks for sub-portfolios and their inclusion in relevant regulatory acts governing the Fund's activities should be addressed."

Additionally, the Chamber stressed the importance of exploring sectors with long-term growth potential to adapt to uncertainties and evolving trends in global real estate markets.