Israeli Investment Funds Outperform Expectations in August Amid Market Volatility

Israeli long-term savings funds, including provident and pension funds, saw stronger-than-expected returns in August. The general track in provident funds yielded an average of 1.4%, surpassing the 1.1% forecast, while the stock track achieved 2.4%, exceeding the projected 2%. Pension funds for those aged 50 and under also posted a 1.4% return, better than the anticipated 1%.

Altshuler Shaham led the performance tables for August, particularly in the general provident fund track with a 1.9% return, and significantly in the stock track with a 3.5% return. This strong showing contrasts with previous months where their outperformance was attributed to lower losses. The firm's increased exposure to international markets, which have recently outperformed the Tel Aviv Stock Exchange after a two-year rally, is cited as a key factor.

Despite positive returns in August, experts are advising caution due to rising US Treasury yields, which have surpassed 5%. This makes bonds a more attractive alternative to stocks, potentially impacting risk asset valuations. The strengthening shekel against the dollar also eroded some of the gains from US indices like the S&P 500, which returned only 1% in August.

Looking ahead, investment managers suggest a balanced approach, recommending a diversification into bonds alongside stocks. They note that while technology and AI remain areas of interest, sectors like banking and insurance are currently considered reasonably valued. The impact of potential US interest rate hikes, upcoming elections, and energy prices are also key factors to monitor in the coming months.