Most Israeli Actively Managed Funds Lag Behind S&P 500 Over Three Years

Most actively managed Israeli funds investing in the U.S. market have failed to outperform the S&P 500 index over the past three years, even when currency fluctuations are excluded. The S&P 500 returned 72.15% during this period, a benchmark that no Israeli fund in this category managed to beat. When considering the shekel-denominated return, which accounts for currency changes, the S&P 500 yielded approximately 35.5%. Only three funds managed to surpass this figure.

The top-performing fund was "Kavan Global Stocks US," a small fund managing NIS 20 million, which achieved a 72.1% return. This fund is managed by Kavan Investment House, recently acquired by the HitechZone consumer club. Second was "Altshuler Shaham S&P 500," a large fund with NIS 615 million under management, returning 48.3%. "Eyalon Stocks US," another small fund with NIS 48 million, secured third place with a 47.4% return. The average return for the category was 31.1%.

Funds that significantly underperformed included "Kessam Active Stocks US" with an 11.4% return and "Harel Foreign US" with a 3% return over three years. In the last 12 months, the results were more balanced, with eight funds beating the S&P 500's shekel return of 7.5%. "Eyalon Stocks US" stood out with a 22.7% return, while "Harel Foreign US" posted a negative 8% return.

Industry experts acknowledge the difficulty in consistently beating major indices. Dror Berger, an investment manager at Altshuler Shaham, attributes the U.S. market's sophistication and competitiveness to the challenge. He emphasizes the importance of long-term perspective and fundamental analysis, noting that large firms like Altshuler Shaham have access to advanced information systems and industry contacts. Berger also suggests that excessive familiarity with company management can sometimes hinder Israeli fund managers.

Ofir Weitzman, an overseas equity investment manager at IBI Mutual Funds, describes many Israeli funds as "disguised indices," making only minor adjustments to sector or stock weightings due to fear of deviating too far from their benchmark. He argues that true outperformance requires identifying long-term trends, taking high-conviction positions, and seizing opportunities, citing Google's low P/E ratio as an example of when to be bold. Weitzman believes that as markets become more expensive, genuine stock picking will gain value, particularly from managers who dare to look beyond the S&P 500.

Global research supports the difficulty of active management outperformance. A 2026 S&P Dow Jones Indices report found that 79% of large-cap U.S. equity funds underperformed the S&P 500 in 2025, with failure rates reaching 86% over ten years and 93% over twenty years. A Morningstar report from mid-2025 indicated that only 21% of active strategies survived and beat their passive alternatives over the past decade.