Israeli Money Market Funds Yield 3.9% Annually Amid Interest Rate Shifts
Translated & summarized from Bizportal by baba
Israeli money market funds yielded an average of 3.9% over the last year, with September returns reflecting a recent interest rate cut to 3.25%. Top funds like Mor Cash Management Liquidity offered over 4% annually. Key factors in choosing a fund include low management fees and potential tax advantages over bank deposits, especially during periods of higher inflation.
The story in 5 lines · by baba
- Israeli money market funds averaged 3.9% annual yield over the past year.
- September returns reflected the Bank of Israel's interest rate cut to 3.25%.
- Mor Cash Management Liquidity Fund led with a 4.03% yield in the past year.
- Management fees and taxation are key differences compared to bank deposits.
- Funds offer flexibility as yields adjust immediately to interest rate changes.
Israeli money market funds saw average returns of approximately 0.26% in September, translating to an annual rate of about 3.25%, reflecting the Bank of Israel's recent interest rate cut to 3.25%. Over the past 12 months, these funds have yielded an average of 3.9%, though this figure includes a period of higher interest rates and is not indicative of future performance. Money market funds invest in short-term government bonds, bank deposits, and high-rated bonds with maturities up to 90 days, offering daily liquidity. Their yields closely track the prevailing interest rates, adjusting within weeks of rate changes.
In September, fund performance was tightly clustered between 0.24% and 0.28%. Top performers over the last year include Mor Cash Management Liquidity Fund with 4.03%, followed by Meitav Cash Management Liquidity Fund at 4.02%, and Meitav Cash Shekel Kosher at 4%. Funds avoiding corporate bonds, such as Altshuler Shaham Cash Kosher without Corporate, yielded 3.67%, offering lower risk for slightly reduced returns.
When selecting a money market fund, management fees are a key differentiator, ranging from zero to 0.25% annually. Funds like Kesem Active Cash Kosher (0.025%) and Mor Cash Management Liquidity (0.04%) have low fees, while others charge up to 0.24%. Some funds also impose an entry fee, or "addition rate," which can offset savings from low management fees for short-term investors. Investors should monitor fees as they can change.
A significant difference between money market funds and bank deposits lies in taxation. Deposits are taxed at 15% on nominal gains, while funds are taxed at 25% only on real gains above inflation. This tax structure makes funds more advantageous during higher inflation periods. Funds also offer greater flexibility, as their yields adjust immediately to market rate changes, unlike fixed-term deposits.
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