Ayalon Insurance's Aggressive Pension Fund Launch Yields Massive Deposits But Low Returns
Ayalon Insurance has achieved a remarkable marketing success in the Israeli pension and severance fund market, attracting 1.2 billion shekels in new deposits in August, just one year after re-entering the sector after a decade-long absence. This figure places Ayalon second only to Phoenix, which reportedly raised approximately 1.5 billion shekels. The company's aggressive media campaign was supported by a significant incentive for insurance agents: a trip to Sydney, Australia, for those who met recruitment targets of 16 million shekels, with a portion allowed from existing financial policies. Ayalon also offers agents a one-time commission of 7,000 to 9,000 shekels per million shekels recruited.
Despite the substantial influx of funds, Ayalon's investment returns for August have lagged behind industry averages. While specific figures for Ayalon are not yet finalized, internal calculators suggest its general pension tracks yielded around 0.6% and equity tracks around 0.9%. This contrasts with the industry average of 1.1% for general tracks and 2% for equity tracks in August, according to Meitav. Tamir Hershkovitz, Ayalon's senior vice president of investments, attributed the low returns to the short period the funds were actively managed, citing only 10 to 14 days of actual operation due to regulatory and transfer processes. He explained that the reported average return was diluted by being calculated over the entire month, not reflecting the true investment performance.
Industry competitors have disputed Ayalon's explanation, arguing that daily returns should reflect the performance of funds already invested, regardless of new inflows. They also suggest Ayalon might be using a 'basket' method, where new pension funds are managed within existing portfolios of older financial policies, potentially masking the performance of the new funds. This situation has put insurance agents who promoted Ayalon's products in an awkward position, as their clients may have missed out on higher returns from competitors in the first month. The industry is now looking to September to see if Ayalon's returns improve, which would indicate either technical startup issues or a more significant investment management challenge.
