The Republics of Kazakhstan and Azerbaijan have much more in common than the Caspian Sea and the independence from the Soviet Union in 1991. Both nations have a history of an active State Investment landscape, with various vehicles looking after different missions.

Azerbaijan was the first one to move in 1999, when it established the State Oil Fund of Azerbaijan (SOFAZ) to deposit and manage the revenues received from the national oil company, SOCAR. A year later, Kazakhstan followed the same strategy, with the National Oil Fund managing the surplus coming from KazMunayGas. Both SOFAZ and NOF were set up as rainy-day funds, and have maintained a very liquid and conservative profile, with investments in bonds, stocks, and most notably, gold.

Over the years, however, SOFAZ and NOF continued growing their assets, and naturally, the stabilization mission led to one for savings, with a more risk averse strategy. SOFAZ destined 15% to buying properties in London, Paris, Milan, Moscow or Tokyo, while NOF established a separate entity – NIC – to invest primarily in private equity and hedge funds.

In parallel, Nursultan Nazarbayev had visited Singapore in 2003, and was walked through the success of Temasek and the rationale of managing major state assets under a single umbrella. So, in 2006, the Government of Kazakhstan transferred 22 holdings under a new entity "Samruk Holding", which would merge with "Kazyna" three years later. Since then, Samruk-Kazyna (SK) has been an example of a “wealth-less” SWF, with the sole mission of managing and privatizing some of the country's leading businesses. Its success was actually followed by two subsequent holding companies, Baiterek (2014), and KIDF (2019).

In late 2020, Azerbaijan finally made a move and copied Samruk-Kazyna's model to create a holding umbrella by the name of Azerbaijan Investment Holding (AIH). AIH has been transferred 17 of Azerbaijan’s leading companies in energy, transport, utilities and finance, including the national oil company SOCAR. Similarly to Kazakhstan, Azerbaijan’s strategic fund owns the NOC, which in turns gives dividends to the Central Bank, for this to share between the stabilization and savings fund.

Last Thursday, SK and AIH signed a Memorandum of Understanding for an increased cooperation around not only the oil and gas sector, but also transportation and logistics in the context of the Belt and Road Initiative. They certainly have the firepower and portfolio companies to lead change their countries.

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