Israeli Pension Funds Shift Heavily to Local Stock Market

Israeli institutional investors, managing public pension funds, significantly increased their exposure to the Tel Aviv Stock Exchange in 2025, according to an analysis by the Capital Markets Authority. The proportion of equities within the stock portion of these pension portfolios, which constitutes about 30% of total assets, rose to over half, reaching 52% in Israeli stocks. This "return home" was particularly pronounced between 2024 and 2025, with Israeli stocks making up 45% of institutional portfolios in 2024, up from approximately 38% at the start of the decade. Consequently, foreign stock holdings decreased from 62% to 48% of institutional stock portfolios last year.

Overall managed assets in long-term savings and nostro products grew by approximately 16% in 2025, reaching about 3.4 trillion shekels. This growth was attributed to positive market returns and continued net deposits from savers. Both 2024 and 2025 saw double-digit returns across most pension and provident fund types, ranging from 13% to 16.2%. The Tel Aviv Stock Exchange's general stock index surged by 47% in 2025, following a 31% rise in 2024, indicating a more volatile but significantly more profitable market.

The shift towards domestic investments also correlated with a decrease in foreign currency exposure, falling from 29% in 2024 to 26% in 2025. Total foreign investment exposure dropped to 47% of assets in 2025, down from a peak of 52% in 2024. This move towards Israeli assets is seen as strengthening the shekel, as it likely involved selling dollars and buying local currency.

Assaf Nachmani, head of the investment division at the Capital Markets Authority, noted that while 2025 offered strong double-digit returns supported by robust stock markets globally and locally, long-term trends like increased equity exposure highlight the importance of diversification, currency management, and risk management. He emphasized the need for a multi-year perspective on savings performance and appropriate risk levels for savers. The authority will continue to monitor investment portfolios, risk levels, and management practices to ensure responsible and transparent management of savers' funds.

Additionally, the analysis revealed a consistent rise in overall equity exposure, including direct holdings and derivatives, from about 41% in 2020 to approximately 54% in 2025. This trend reflects an increase in risk assets within investment portfolios, driven by positive stock market performance and the development of high-equity investment tracks.