Sofaz Boosts 2012 Allocation in Emerging-Market Stocks, Debt

Azerbaijan’s State Oil Fund increased investment in emerging markets and lower-rated bonds last year to boost returns as the Caspian Sea nation cut crude production for a third year.

The fund raised its emerging-markets holdings to about 14 percent in 2012 from 9.5 percent the year before, the Baku-based Sofaz, as it’s known, said today on its website. The European Union remained the largest destination for its investments at the end of the year, it said.

Purchases of Turkish and Russian bonds contributed to a “significant rise” in debt holdings rated A or lower, Sofaz said. Investments in bonds with the highest AAA rating accounted for almost 33 percent of Sofaz’s holdings, down from 36 percent the previous year, and AA-rated notes fell to 11 percent from 14.3 percent in 2011, it said.

Sofaz, established in 1999 to manage income from the sale of oil and natural gas, had $34.7 billion of assets as of July 1, an increase of 1.6 percent from the end of last year, it said today in an e-mailed statement. The assets are equivalent to almost 50 percent of the nation’s economy.

The fund started investing in gold, real estate, Australian dollars, Russian rubles and Turkish lira last year to diversify its holdings. Sofaz has bought 22.4 tons of gold as of July 1, according to the statement.

The third-largest oil producer in the former Soviet Union after Russia and Kazakhstan has cut production since 2010 when output peaked at 51 million metric tons. Azerbaijan pumped 43 million tons of oil last year, down from 46 million tons in 2011.