BAKU, Azerbaijan, February 24. The collaboration between the Arab Energy Fund and the State Oil Fund of Azerbaijan (SOFAZ) with CVC DIF to establish a joint investment mechanism that will invest alongside DIF7 represents a natural progression of the fund's long-term strategy and enhances its international standing, Azerbaijani economist expert Inglab Ahmadov told Trend.
This agreement aligns with a prevailing pattern observed in recent years.
"The fund has been strengthening its cooperation with major international financial groups for several years, including players like BlackRock, expanding its presence in global portfolio investments. In this context, the new partnership is fully consistent with the strategy SOFAZ has been pursuing in recent years," he explained.
The expert emphasized that this is not simply a collaboration with an Arab fund.
"The project also involves CVC DIF, a European infrastructure and logistics company specializing in investments in logistics, technology, transportation, and storage. This adds additional depth to the agreement, as such projects have not only investment but also geo-economic significance," he said.
Ahmadov highlighted that earlier discussions also underscored
the importance of significant investment and logistics initiatives,
focusing on both diversification and geopolitical influence.
He stated that, in several instances, these projects aligned with
the goals of energy transformation and the advancement of renewable
energy sources. Viewed from this angle, the existing agreement
holds considerable importance and is strategically well-timed.
The specialist highlighted the geographic composition of SOFAZ's
investment portfolio.
"Today, the fund's largest portfolio investment is traditionally concentrated in Europe (approximately 26 percent, with North America accounting for approximately 24 percent), with gold also accounting for a significant portion. Thus, the fund's primary investment activity has long been concentrated in the Euro-Atlantic region.
However, growing uncertainty and volatility in Western markets are objectively pushing the fund toward further geographic diversification. In recent years, SOFAZ has been actively collaborating with Arab sovereign wealth funds and large investment structures, gradually strengthening its presence in the MENA region," he said.
The expert called this region relatively stable, solvent, and focused on long-term development, making it a promising investment destination.
He believes that thematic, partner, and geographic
diversification are especially important considering the fund's
increasing assets. Boosting profitability demands a strategic
investment approach: overlooking the surging gold price, enhanced
profits can only be achieved through meticulously crafted and
calculated investments that effectively manage risks while
providing tangible returns. The new agreement, as noted by the
expert, aligns perfectly with this rationale.
In response to a query regarding the potential for the partnership
to enhance economic collaboration between Azerbaijan and Middle
Eastern nations, Ahmadov highlighted that a favorable trend in this
area has been evident over the last 5 to 10 years.
"Major Arab companies are participating in renewable energy projects in Azerbaijan, while negotiations on other large-scale investment initiatives are underway. This is truly part of the policy of diversifying foreign economic relations," he said.
At the same time, the expert underscored the need for balance. Even within the framework of the current agreement, cooperation with European partners is included, which is due to technological and investment risks. Technological innovation remains largely concentrated in Western countries and, to some extent, in China, so a combined partnership format minimizes risks and increases investment efficiency.
"The multiplicative participation of players from various fields, including geographic, technological, and investment, creates a more sustainable model of cooperation," the expert mentioned.
Commenting on whether this partnership is part of a broader strategy to diversify income in the post-hydrocarbon era, Ahmadov pointed out that in recent years, the significant growth in the fund's assets was primarily due to favorable conditions in the gold market.
"However, excessive reliance on this factor carries risks, as a price correction is possible," he added.
In this regard, the expert emphasized the need for alternative investment options, including stocks, infrastructure, and logistics projects, even if they are considered riskier.
According to him, investments in stocks and other market instruments rank third in the fund's asset structure after gold and government treasuries, but their strategic role will increase.
"Therefore, the partnership with the Arab Energy Corporation and the CVC DIF is in line with SOFAZ's overall strategy: geographic and instrumental diversification, which involves a gradual increase in the share of higher-yielding, albeit riskier, investments. Ultimately, this policy is aimed at ensuring sustainable and higher returns for the fund over the long term," Ahmadov concluded.
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