Israel's Psagot Boosts Global Exposure for $17 Billion Fund

Updated on
  • Psagot, owned by Apax Partners, to seek more global equities
  • Japan attractive thanks to Abe’s economic policies, CEO says

Israel’s largest investment firm will devote more of its 60 billion-shekel ($17 billion) provident fund to foreign equity purchases as surging assets prompt the country’s biggest money managers to scour the world for returns.

Barak Soreni

Source: Psagot Investment House Ltd.

Psagot Investment House Ltd., fully owned by Apax Partners LLP, will increase the weight of global stocks to a quarter of the portfolio over three years from less than 20 percent today, Chief Executive Officer Barak Soreni said in an interview.

“Because of the enormous amounts of money piling in every year, we’ll be more global, especially in equities,” Soreni said at his Tel Aviv office. Psagot, which oversees 189 billion shekels, will invest “a few extra billions in bonds” abroad as well, he said. About 21 percent of those funds are invested abroad.

A 2008 law to increase public saving boosted the coffers of the country’s largest institutional investors and also created for them a rich man’s dilemma of what to do with this new cash. The local bourse saw a drastic downturn in trading volumes just as investment houses became flush with money, prompting them to invest more abroad.

Psagot has been buying stocks in the U.S. and Europe, with a focus on Germany, France and the U.K., Soreni said, adding that most of its research has been done in-house. The firm has also piled into Japanese equities in recent years, impressed with Prime Minister Shinzo Abe’s economic policies, he added. 

`Enormous Amounts of Money'

Israeli money managers are seeing a flood of new cash each year

Source: Bank of Israel

“There’s a special blend of fiscal and monetary policy that seems to be working,” he said. “We recommend going into Japan.”

Long Term Trends

The long-term trends in Israeli society -- with the highest birth rate in the OECD and an expanding work-participation rate, despite record low unemployment -- point to future jumps in inflows, Soreni said. For those reasons, he is bullish on Israeli financial firms. Many of those are up for sale following a 2013 law to break up conglomerates controlled by wealthy families.

Apax is exploring an initial public offering for its unit on the Tel Aviv Stock Exchange, a person familiar with the matter said last year. Soreni declined to comment about any plans to sell the firm.

Assets Swell at Israel's Largest Money Manager

Psagot manages about 60 billion shekels more than its closest peer

Source: Psagot

* 2018 figure as of Feb. 20

Despite the country’s positive trends, there have been few takers for Israeli assets. Foreign investors have shied away from open stakes in the country’s largest banks, credit card companies and insurers, citing burdensome regulations. Other proposed deals with Chinese buyers have been torpedoed by the Israeli government.

Soreni said strong regulation provides the stability an investor needs going into a major purchase and he gave the government credit for the country’s relatively smooth ride through the 2008 financial crisis.

“A good company is a good company is a good company,” Soreni said. “And those businesses find buyers.”

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