The State Oil Fund of Azerbaijan is one of the world’s best known examples of a successful and resilient stabilization fund, and is among the most transparent and best governed SWFs. We were delighted to speak with Mr. Farhad Zeynalov, its Chief Investment Officer, about SOFAZ’s background, portfolio, and future goals.
[GSWF] SOFAZ has played a key role in Azerbaijan’s finances / budget since 2000. Can you please walk us through the journey, including any success and challenge?
[SOFAZ] SOFAZ was seeded with US$ 271 million in 1999 to manage O&G revenues transparently and effectively, ensuring that the country’s wealth benefits both current and future generations. The fund has reached a peak of US$ 63 billion as of Q1 2025, including investment income for US$ 15 billion since inception. The journey has not been without challenges: global financial crises, oil price fluctuations, the COVID-19 pandemic, and geopolitical tensions have tested the Fund’s resilience. Looking ahead, SOFAZ remains firmly committed to preserving and growing national wealth, supporting fiscal stability, and contributing to a more sustainable and diversified Azerbaijani economy.
[GSWF] How do you see the role of SOFAZ in the local economy, incl. transfers to the state budget and project financing?
[SOFAZ] With over US$ 135 billion transferred to the state budget since inception, SOFAZ has served as a fiscal anchor, helping the economy remain resilient through both prosperous periods and times of uncertainty. The Fund has also financed major infrastructure projects and invested in human capital through education, notably by sponsoring Azerbaijani students at top global universities.
[GSWF] The fund has doubled its holdings in gold to 26% of its portfolio. Is this in views of a global economic recession?
[SOFAZ] In recent years, SOFAZ has accelerated its diversification efforts, expanding into new geographies such as China and the Gulf, increasing allocations to alternatives, and embedding ESG principles into investment decisions. We have also increased our holdings in gold to 26% of our portfolio, i.e., US$ 16.1 billion, in a deliberate effort to strengthen the country’s gold reserves within a broader reserve management strategy, which together with a diversified currency mix, supported growth in AuM in Q1 2025.
[GSWF] SOFAZ owns properties in London, Paris, Moscow and Tokyo. How do you see this portfolio evolving?
[SOFAZ] Since entering the asset class in 2012 through direct acquisitions of prime properties in key global cities, SOFAZ has built a real estate portfolio now valued at approximately US$ 3.7 billion, i.e., 6% of our AUM. Today, 20% of the portfolio is held in direct assets, while 80% is allocated to indirect investments via private real estate funds and co-investments. The current focus is on indirect investments with top-tier global managers, with a focus on resilient sectors such as logistics, residential, and data centers.
[GSWF] SOFAZ has increased its portfolio in private equity. Do you expect to invest in other alternative asset classes?
[SOFAZ] SOFAZ has partnered with leading global managers such as GIP, EQT, and Brookfield, committing capital across traditional infrastructure, energy transition, logistics, and digitalization. Looking ahead, we intend to deepen our exposure to real assets — particularly in transportation, renewable energy, and digital infrastructure — which tend to be less sensitive to economic cycles.
[GSWF] SOFAZ has set up joint efforts like the one with Hassana in Saudi Arabia in 2024 – do you expect more of these?
[SOFAZ] Strengthening partnerships with our peers remains a strategic priority for SOFAZ. We recently signed agreements with Hassana and with CIC, and we expect further collaboration to expand international cooperation and drive long-term value creation.
[GSWF] SOFAZ is one of the world’s most transparent SWFs – how important do you think this is for sovereign funds?
[SOFAZ] For SOFAZ, transparency and governance are not just best practices — they are foundational. They foster public trust, safeguard long-term national interests, strengthen international credibility, and ensure the sustainability of national wealth.
[GSWF] How many people does SOFAZ employ? Do you plan to open any office overseas?
[SOFAZ] SOFAZ currently employs around 150 highly qualified professionals. While we maintain a global presence through strategic partnerships and participation in international platforms, there are no immediate plans to establish overseas offices.
