Shahmar Movsumov has an interesting challenge. He has been entrusted with a very large amount of money, told to spend some of it wisely but to keep a sizeable proportion for the future. And he has also been told to publicly account for every cent.
Mr Movsumov is the chief executive of the State Oil Fund of the Republic of Azerbaijan (Sofaz), the sovereign wealth fund (SWF) of the comparatively small but energy-rich Caspian country, and his main job is to keep the balance between expenditure and management of the surplus reserves built up over the years.
Since the cash began to flow 15 years ago, Sofaz has received some US$110 billion worth of energy revenue and spent most of it. “Invested in future generations,” Mr Movsumov says.
But nearly $40bn is still in the bank.
How it is spent is closely scrutinised. “If you are asking me: ‘is the government of Azerbaijan reporting every dollar, every barrel of oil and every cubic metre of gas that comes out of the Caspian?’, the answer is yes. And we tell the world, too,” he says.
SWFs have not always had this attitude. As organisations, they have a chequered history. Before the global financial crisis, western institutions were worried about them, seeing sinister political motives behind their investments in big banks or corporates in the United States and Europe.
Partly because of the crisis and partly because the SWFs took steps to put their own house in order under the Santiago principles – a schedule of transparency and governance measures hammered out in the Chilean capital – the West seems less bothered about the issue these days. Or maybe just more willing to take capital investment, wherever it comes from.
Sofaz, under Mr Movsumov since 2006, appears to have taken the Santiago principles to heart, especially when it comes to transparency.
“Transparency has always been high up our list of business technologies. The stakeholder is not just one person, but the population of the whole country, and we are responsible to them. So we have a duty to publish everything we can,” he says.
“We publish quarterly press statements of our financial affairs, and we have an international audit every year by one of the big accounting firms.”
Sofaz was also one of the founding members of the Extractive Industries Transparency Initiatives, a standards body first suggested by the former British prime minister Tony Blair, who also plays a significant role in other ways in Azerbaijan’s energy industry.
Mr Movsumov has something of the young Mr Blair about him. In his early 40s, he has an enthusiasm for his job and a view on international events.
He is part of the younger, technocratic generation brought through by the Azerbaijan president, Ilham Aliyev, to present a more modern face to the world.
Like the president, he is from the Azerbaijan exclave of Nakhchivan, which has provided many of the country’s ruling elite, and he attended the Moscow State Institute of International Relations. But he rounded off his career with a master’s degree at the Kennedy School of Government at Harvard University.
He is a safe pair of hands in the high-profile job, but is gradually bringing in some new and different techniques to the way Sofaz is run.
The main aim has always been to spend Azerbaijan’s energy legacy for the benefit of the country, and over the years this has primarily meant investment in infrastructure and essential utilities.
Since 1999, when the fund started receiving energy revenue, about $70bn has been spent on projects to modernise the dilapidated post-Soviet economy.
“Most has gone on strategic economic development. Before, we used to buy electricity from Russia, now we export it to Russia, Iran and Georgia. It used to be only Baku [the capital city] area that had access to gas – now it’s 83 per cent of the country. The same applies to water supply, the sewage and roads networks,” Mr Movsumov says.
He is happy to confirm estimates by the Sovereign Wealth Fund Institute, an industry think tank, that Sofaz has about $38bn in reserves, which by its rules has to be invested outside the country.
At first, the Sofaz portfolio was cautious, mainly invested in fixed-interest government bonds. This worked in the fund’s favour during the crisis, when some SWFs lost big amounts on investments in esoteric financial instruments. “We made $300 million in 2008 because we’d been so cautious before,” he says.
Since 2012, however, Mr Movsumov has begun to gradually diversify the portfolio. The majority is still in fixed interest, but he has branched out into public and private equity (10 per cent of total investment) and into gold and property, at 5 per cent each. “It’s the first time in our history we’ve had reserves in gold, which I regard as having an intrinsic value to some extent outside the actions of governments,” he says.
In terms of currencies, the strategy is still focused on the traditional grouping of dollar, euro, sterling and a few others, but Sofaz is in talks with the Chinese authorities to be allowed to put some of its assets in yuan, maybe as much as $1.8bn.
“We are awaiting the results of an application to the Chinese authorities, who are very protective and we have to have their permission. But I am optimistic we’ll get some good news soon.”
Relations with Arabian Gulf SWFs, which are some of the biggest in the world, are very cordial, he says. “Azerbaijan has always enjoyed good commercial relations with the UAE. The Gulf is a very interesting place, and similar to us. It is flush with money and it understands infrastructure. If there was an opportunity to do more there, especially in Abu Dhabi, we’d certainly pursue it.”
fkane@thenational.ae
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Mission to Seafarers is one of the largest port-based welfare operators in the world.
It provided services to around 200 ports across 50 countries.
They also provide port chaplains to help them deliver professional welfare services.
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Western Region Asia Cup Qualifier
Results
UAE beat Saudi Arabia by 12 runs
Kuwait beat Iran by eight wickets
Oman beat Maldives by 10 wickets
Bahrain beat Qatar by six wickets
Semi-finals
UAE v Qatar
Bahrain v Kuwait
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Coal Black Mornings
Brett Anderson
Little Brown Book Group
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
T10 Cricket League
Sharjah Cricket Stadium
December 14- 17
6pm, Opening ceremony, followed by:
Bengal Tigers v Kerala Kings
Maratha Arabians v Pakhtoons
Tickets available online at q-tickets.com/t10
Key figures in the life of the fort
Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.
Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.
Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.
Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.
Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.
Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.
Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.
Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.
Sources: Jayanti Maitra, www.adach.ae
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Anti-semitic attacks
The annual report by the Community Security Trust, which advises the Jewish community on security , warned on Thursday that anti-Semitic incidents in Britain had reached a record high.
It found there had been 2,255 anti-Semitic incidents reported in 2021, a rise of 34 per cent from the previous year.
The report detailed the convictions of a number of people for anti-Semitic crimes, including one man who was jailed for setting up a neo-Nazi group which had encouraged “the eradication of Jewish people” and another who had posted anti-Semitic homemade videos on social media.
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
The%20Afghan%20connection
%3Cp%3EThe%20influx%20of%20talented%20young%20Afghan%20players%20to%20UAE%20cricket%20could%20have%20a%20big%20impact%20on%20the%20fortunes%20of%20both%20countries.%20Here%20are%20three%20Emirates-based%20players%20to%20watch%20out%20for.%0D%3Cbr%3E%20%0D%3Cbr%3E%3Cstrong%3EHassan%20Khan%20Eisakhil%3C%2Fstrong%3E%0D%3Cbr%3EMohammed%20Nabi%20is%20still%20proving%20his%20worth%20at%20the%20top%20level%20but%20there%20is%20another%20reason%20he%20is%20raging%20against%20the%20idea%20of%20retirement.%20If%20the%20allrounder%20hangs%20on%20a%20little%20bit%20longer%2C%20he%20might%20be%20able%20to%20play%20in%20the%20same%20team%20as%20his%20son%2C%20Hassan%20Khan.%20The%20family%20live%20in%20Ajman%20and%20train%20in%20Sharjah.%0D%3Cbr%3E%20%0D%3Cbr%3E%3Cstrong%3EMasood%20Gurbaz%3C%2Fstrong%3E%0D%3Cbr%3EThe%20opening%20batter%2C%20who%20trains%20at%20Sharjah%20Cricket%20Academy%2C%20is%20another%20player%20who%20is%20a%20part%20of%20a%20famous%20family.%20His%20brother%2C%20Rahmanullah%2C%20was%20an%20IPL%20winner%20with%20Kolkata%20Knight%20Riders%2C%20and%20opens%20the%20batting%20with%20distinction%20for%20Afghanistan.%0D%3Cbr%3E%20%0D%3Cbr%3E%3Cstrong%3EOmid%20Rahman%3C%2Fstrong%3E%0D%3Cbr%3EThe%20fast%20bowler%20became%20a%20pioneer%20earlier%20this%20year%20when%20he%20became%20the%20first%20Afghan%20to%20represent%20the%20UAE.%20He%20showed%20great%20promise%20in%20doing%20so%2C%20too%2C%20playing%20a%20key%20role%20in%20the%20senior%20team%E2%80%99s%20qualification%20for%20the%20Asia%20Cup%20in%20Muscat%20recently.%0D%3Cbr%3E%3C%2Fp%3E%0A
Squads
India: Kohli (c), Rahul, Shaw, Agarwal, Pujara, Rahane, Vihari, Pant (wk), Ashwin, Jadeja, Kuldeep, Shami, Umesh, Siraj, Thakur
West Indies: Holder (c), Ambris, Bishoo, Brathwaite, Chase, Dowrich (wk), Gabriel, Hamilton, Hetmyer, Hope, Lewis, Paul, Powell, Roach, Warrican, Joseph
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The biog
Age: 59
From: Giza Governorate, Egypt
Family: A daughter, two sons and wife
Favourite tree: Ghaf
Runner up favourite tree: Frankincense
Favourite place on Sir Bani Yas Island: “I love all of Sir Bani Yas. Every spot of Sir Bani Yas, I love it.”
