May Was a Strong Month for Provident Funds, Led by Technology and Asia Bets

May was another positive month for Israeli provident funds. The general track, the largest in the industry, posted an average return of 2.1%, helped by gains in both the Israeli and U.S. markets. Provident funds are a major medium and long-term savings vehicle in Israel, with equity exposure estimated at 30% in conservative funds and up to 50% in more aggressive ones.

In May, the Tel Aviv 35 rose 1.85%, the Tel Aviv 125 gained 2.7%, and the Tel Aviv 90 climbed 5%. Bank stocks were the main drag, falling 5% as investors concluded the big banks may struggle to repeat their profitability in a falling interest-rate environment. Abroad, the S&P 500 advanced 5% and the Nasdaq surged 10.5%, supported by optimism over AI adoption and the strong profits reported by major technology companies.

Returns varied across funds, with the gap between first and last place in the monthly rankings nearing 1%. Analyst’s provident fund ranked first with a 2.75% gain, followed by Clal at 2.38% and Harel at 2.33%.

Eran Goldring, deputy CEO of Analyst Group and chief investment officer, said the firm benefited from tilting toward technology, semiconductors and East Asia after March’s declines. He said exposure to South Korea and a longer bond duration also helped in April and May, while in Israel the firm emphasized energy, especially renewable energy. He added that no Western market is clearly cheap today, so diversification is the best approach. Goldring said AI still drives markets “to a very large extent,” but warned that if the theme weakens, markets will be affected. Looking ahead to June, after a rough start and a 2.5% drop in the Tel Aviv 35, he said markets remain more complicated and less reactive than when valuations were lower, so investors should stay diversified and avoid falling in love with a single thesis.