BAKU, Azerbaijan, April 19. By the time the first quarter of 2025 rolled around, AAA-rated instruments accounted for a hefty 46.5 percent of the bonds and money market instruments tucked away in the portfolio of the State Oil Fund of Azerbaijan (SOFAZ).
Data obtained by Trend from the Fund indicates that investments in AAA-rated instruments have decreased by 19.9 percent compared to the same period of 2024 (66.4 percent).
Additionally, the Fund’s investment portfolio in the reporting period of this year consisted of 23.4 percent AA-rated instruments, 17.3 percent A-rated instruments, 12.4 percent BBB-rated instruments, and 0.4 percent non-investment-grade instruments.
To note, an AAA rating is the highest credit rating, indicating that a financial instrument or issuer (i.e., the borrower) has a very strong financial stability and an excellent ability to repay debt on time. Investing in these instruments is considered highly safe.
An AA rating also represents very high reliability, though it is one level below AAA. Borrowers with this rating can also repay their debts, but the risk is slightly higher than AAA. Their yield may also be slightly higher than that of AAA-rated instruments.
An A rating signifies good credit quality. These instruments can generate stable income and are generally reliable, but they may be more susceptible to economic and financial changes.
BB-rated instruments are fairly reliable in terms of debt repayment, but risks may rise significantly if there are substantial economic changes. Their yield may be higher than that of A- and AA-rated instruments.
Non-investment-grade instruments are considered speculative and high-risk. Instruments with a credit rating below BBB (such as BB, B, CCC, etc.) fall into this category. These instruments are risky but may offer higher returns, as investors expect greater profits for taking on more risk.
Established in 1999 with assets amounting to $271 million at the time, SOFAZ is an extrabudgetary fund that operates as a distinct legal entity, independent of the government or central bank. SOFAZ protects and judiciously administers energy-derived revenues for current and forthcoming generations. A fundamental principle of SOFAZ is transparency. During this era, the Fund has evolved institutionally and attained international recognition as an asset management organization.
