SOFAZ transforms investment operations with SimCorp

Established in 1999, SOFAZ, Azerbaijan's sovereign wealth fund, aims to efficiently manage and safeguard the nation's oil and gas revenue for present and future generations.

Business case

In 2013, SOFAZ faced growing complexities in managing its portfolio and assets, leading to the realization that the existing legacy system could no longer meet their expanding needs. The system's inability to accommodate new asset classes introduced since 2012 became a pressing concern, and rapid asset growth only exacerbated the operational challenges and data management issues.

To find a more robust and future-proof solution, SOFAZ embarked on thorough research of available portfolio management and accounting systems in the market. The primary objective was to streamline operations, achieve maximum process automation, and enhance efficiency in handling substantial data volumes. SOFAZ had two options: integrate their incumbent portfolio system with other systems or switch to a new all-in-one solution. The analysis revealed that maintaining the current system while incorporating additional tools would incur nearly the same cost over a long term as switching to a new end-to-end system. On the other hand, staying with the legacy system and integrating best-of-breed solutions would introduce added complexity and risks.

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Solution

After the tender process, SOFAZ adopted the front to back SimCorp Dimension solution. The front-to-back capabilities of SimCorp Dimension stood out as the optimal fit for SOFAZ’s requirements. SimCorp Dimension’s integration of portfolio management and accounting functions, combined with pre-built interfaces with established financial data providers, provided the fund with a solid foundation for continued growth and success.

SimCorp was chosen for its integrated approach, combining functions like order management, trade execution, settlements, and reconciliation in one system. This streamlined the workflow and created a unified platform for managing SOFAZ’s investment operations. Automation of investment related processes reduced manual intervention and improved operational efficiency.

SimCorp's front-to-back solution reduced complexity, facilitated data flow between various financial systems, data sources, and service providers. The level of integration, combined with the system's flexibility, allowed customization to meet SOFAZ's unique needs and preferences.

SimCorp's portfolio management system offered a wide range of features, including portfolio analysis, cash management, performance measurement, pre-trade and post-trade investment compliance monitoring and integration with risk management system. These capabilities allowed SOFAZ to analyze and monitor portfolios, ensuring strict compliance with rules and regulations while optimizing the investments.

Our selection of an integrated solution and our automation objectives facilitated a seamless portfolio transformation, to support SOFAZ's exponential 60 percent growth in AuM since 2015 and emphasizing the crucial role of innovation and efficiency in asset management.

Vadim Pschenichniy, Director, Risk Management

Business benefits

Despite significant growth in Assets under Management (AuM), SimCorp's automation capabilities ensured a seamless transition. SOFAZ’s AuM surged by over 60 percent since 2015, and the portfolio positions almost doubled.

SimCorp provided a singular source of truth for reporting and data analysis, centralizing and consolidating the data for comprehensive reporting needs, which in term contributed to decision-making processes.

Implementing SimCorp Dimension reduced the manual data entry, enhanced operational efficiency, minimized operational risk, and improved accuracy and reliability across the operations. Additionally, integration with key platforms like SWIFT, Bloomberg, and Benchmark data providers improved the efficiency of transaction processing, both pre-trade and post-trade.

SimCorp's established partnerships and prebuilt integrations with SOFAZ's chosen risk system provider simplified risk management. The performance module enabled diverse performance measurements, facilitating in-depth analysis of portfolio, market, and benchmark data. In addition, investment compliance monitoring was strengthened through the application of rules and warnings, ensuring strict adherence to regulatory requirements and internal policies. These benefits enabled SOFAZ to operate efficiently and securely while making well-informed investment decisions.

 

Quick Facts

Company name: State Oil Fund of the Republic of Azerbaijan
Headquarters: Baku, Azerbaijan
AuM: USD 45 bn
Established: 1999
Website: https://www.oilfund.az/en

 

About State Oil Fund of Azerbaijan (SOFAZ)

Established in 1999, SOFAZ, Azerbaijan's sovereign wealth fund, aims to efficiently manage and safeguard the nation's oil and gas revenue for present and future generations. It promotes inter-generational equity and acts as a financial buffer during oil price fluctuations, ensuring macroeconomic stability.

SOFAZ employs a prudent and transparent investment strategy, diversifying surplus funds across global assets to optimize risk-return objectives, ensuring financial stability and fostering sustainable growth while preserving national wealth. As the guardian of Azerbaijan's oil wealth, SOFAZ is responsible for the management of surplus oil revenues and ensuring a diversified investment portfolio, supporting the country's long-term financial resilience and preserves valuable natural resources for future generations.