Israfil Mammadov: SOFAZ and Norway's wealth fund have different mandates

Azerbaijan's State Oil Fund (SOFAZ) has a more balanced investment portfolio, Executive Director Israfil Mammadov said.

Report informs that Mammadov was speaking during discussions on the 2027 budget package at today's meeting of parliament's Committee on Economic Policy, Industry and Entrepreneurship.

He said comparisons between the Azerbaijani and Norwegian funds were inappropriate without considering their mandates, objectives and capacity to take risks.

"SOFAZ's mandate encompasses both preserving wealth over the long term - its savings function - and meeting obligations related to the state's financial needs. As you know, the fund finances the non-oil deficit. Norway's fund, meanwhile, primarily performs a savings function. This difference is also reflected in the two funds' investment policies," Mammadov said.

He noted that equities accounted for a particularly large share of the Norwegian fund's portfolio.

"While equities generate returns over the long term, they are financial assets with considerable short-term volatility. SOFAZ has built a more balanced investment portfolio, which includes bonds, gold, real estate and other assets alongside equities.

"Over the past five years, excluding the impact of gold, SOFAZ's average annual return was 5%, compared with 8.7% for Norway's fund. At the same time, in the crisis year of 2022, SOFAZ recorded a loss of 6%, while Norway's fund lost 14%," he said.