Two US Investment Giants Eye Israeli ETF Market
Translated & summarized from Calcalist by baba
US investment giants State Street and First Trust are preparing to launch exchange-traded funds (ETFs) on the Tel Aviv Stock Exchange, aiming to tap into Israel's growing retail investor market. Their entry is expected to increase competition and potentially lower management fees for ETFs tracking international indices. This follows successful launches by BlackRock and Invesco, which currently manage billions of shekels in Israel. The firms are proceeding discreetly due to concerns about potential political backlash.
The story in 5 lines · by baba
- State Street and First Trust, major US investment firms, are preparing to enter Israel's ETF market.
- Their entry aims to capitalize on Israel's rapidly growing base of private retail investors.
- The move is expected to intensify competition and potentially lower management fees for ETFs.
- BlackRock and Invesco have already established a significant presence in the Israeli ETF market.
- Firms are proceeding discreetly due to concerns about potential political opposition.
Two major US investment management firms, State Street and First Trust, are preparing to enter Israel's exchange-traded fund (ETF) market. State Street, which manages the SPDR brand and oversees $6.2 trillion globally, is ranked fourth worldwide behind Fidelity, BlackRock, and Vanguard. First Trust, a smaller entity managing $340 billion, is considered less likely to enter the Israeli market, according to assessments.
Both companies are undergoing legal and regulatory processes to list ETFs tracking international indices on the Tel Aviv Stock Exchange. This move follows similar entries by BlackRock and Invesco in recent years. Their arrival is expected to intensify competition in the local ETF market, where two existing foreign firms already manage tens of billions of shekels.
The firms are reportedly keeping their plans discreet to avoid potential protests from anti-Israel organizations operating in the US and Europe, a significant consideration for international investment firms facing public and political pressure. Listing foreign funds on the local exchange requires meeting regulatory demands, working with the Israel Securities Authority, and establishing operational frameworks, a process that can take years and cost millions of shekels.
This model has already proven successful in Israel, with 40 existing foreign funds managing over 30 billion shekels. BlackRock pioneered this in August 2019 with its iShares funds, now managing approximately 20 billion shekels. Invesco joined in February 2022, listing Irish-domiciled ETFs, and currently manages 10 billion shekels in Israel. Both firms' largest funds track the S&P 500 index.
The entry of State Street and First Trust is anticipated to significantly boost competition, impacting a key growth sector for local investment houses. The Israeli mutual fund industry manages 857 billion shekels, with the ETF sector alone holding 222.4 billion shekels. Foreign firms will be prohibited from offering Israeli funds. The increased competition could further pressure management fees, which are typically low for Irish-domiciled ETFs, often below 0.1% annually.
ETFs offer investors diversified exposure to securities through a single traded security, characterized by low fees, liquidity, and diversification. The growing number of private retail investors in Israel, with 400,000 new trading accounts opened recently, is a primary attraction for these international managers. State Street already has an investment collaboration in Israel with Clal Insurance for savings policies, having launched a joint product in 2024.