Israeli Mutual Funds Attract Billions in September, Led by Cash Funds

Israeli mutual funds saw net inflows of approximately 6.5 billion shekels in September, with over half of that amount, about 3.5 billion shekels, directed into cash funds. This inflow continues despite a global market downturn and a slight moderation from August's stronger 8 billion shekel inflows. The data, compiled by Meitav Investment House, indicates that excluding cash funds, the industry attracted around 3 billion shekels, with traditional active funds receiving about 1.15 billion shekels.

Total assets under management grew by roughly 0.7% to 855.5 billion shekels. Of this increase, approximately 6.5 billion shekels came from new investments, and an additional 2.6 billion shekels resulted from asset value appreciation. This contrasts with August, where market gains contributed significantly more to asset growth.

The passive investment sector attracted about 1.8 billion shekels, comprising 1.4 billion in index funds and 400 million in ETFs. This marks the second consecutive month where passive funds have outperformed traditional active funds, a trend not seen since October 2025.

Overseas equity funds continued to be favored, attracting 1.3 billion shekels, while Israeli equity funds experienced net outflows of 150 million shekels. This trend of investors withdrawing from Israeli stocks persists despite a 1.6% rise in the TA 35 index during September.

Within active funds, general bond funds led with 800 million shekels in inflows, followed by government bond funds with 300 million shekels. These inflows occurred despite a weak month for the local bond market, with government bonds showing a negative return of about 0.6% and corporate bonds falling 0.1%.

Cash funds, which invest in deposits and very short-term bonds and are seen as a bank deposit alternative, have become the industry's primary channel over the past year. They now manage over 210 billion shekels, making them the largest category. Their appeal lies in their near-deposit interest rate returns, low management fees, daily liquidity, and minimal risk, serving as a convenient holding place for investors awaiting decisions or avoiding market volatility.