Israeli Institutional Investors Cut Foreign Currency Exposure by 34 Billion Shekels in 2024
In 2024, Israeli institutional investors managing pension funds, provident funds, and life insurance assets totaling approximately 3.4 trillion shekels have reduced their foreign currency exposure by about 34 billion shekels. This reduction, split nearly evenly between provident funds (16.7 billion shekels) and pension funds (17.3 billion shekels), coincides with the recent weakening of the US dollar against the shekel to below 3 shekels per dollar.
The shift reflects a strategic reallocation of investments, with institutions directing more capital into the local Israeli market and less abroad. Over the past five months, foreign investments decreased by roughly 16 billion shekels in pension funds and 10 billion shekels in provident funds. This move reduces demand for dollars and strengthens the shekel, potentially challenging export-oriented sectors such as high-tech companies that earn in dollars.
An investment manager from a major institutional investor explained that this trend results from two exceptional factors rather than a fundamental strategy change: a public preference shift from US index-linked investments to Israeli equities, and a sharp rise in US stock markets in April and May that led to excess dollar collateral requiring sales to maintain currency exposure targets. These actions have increased pressure on the shekel to appreciate.
Despite criticism blaming institutional investors for the shekel's strength, key figures like Hagai Shreiber, Chief Investment Officer at Phoenix, Israel’s largest institutional investor, argue that these investors do not speculate on exchange rates but respond to market and investor behavior. Shreiber highlighted Israel’s significant foreign currency debt of about 210 billion shekels, mostly dollar-denominated, and criticized the Finance Ministry for not adequately hedging this exposure. He suggested that the ministry should convert some local currency debt back into foreign currency to increase dollar demand and stabilize the exchange rate.
The Finance Ministry disagrees, viewing such measures as temporary fixes. This dynamic follows a 2023 pattern where institutional investors increased foreign market exposure amid judicial reforms, strengthening the dollar to over 4 shekels and dampening local market demand. The ongoing shifts in institutional investment strategies continue to significantly influence Israel’s currency and capital markets.
Summary: Israeli institutional investors have cut their foreign currency exposure by 34 billion shekels in 2024, shifting investments toward the local market amid a weakening dollar. This move strengthens the shekel but raises concerns for export-driven sectors. Critics urge the Finance Ministry to better hedge Israel’s large foreign currency debt to stabilize the exchange rate.
Points: - Israeli institutional investors reduced foreign currency exposure by 34 billion shekels since early 2024. - Shift driven by increased local market investments and reduced foreign holdings in pension and provident funds. - Dollar’s decline below 3 shekels prompted institutional currency hedging and portfolio rebalancing. - Critics blame Finance Ministry for inadequate hedging of Israel’s 210 billion shekel foreign currency debt. - Institutional moves strengthen the shekel but may challenge export-oriented sectors like high-tech. - Finance Ministry rejects calls for large-scale currency hedging, viewing it as a temporary solution.
Topic: economy
Entities: {"people":["Hagai Shreiber"],"organizations":["Phoenix","Finance Ministry"],"places":["Israel","United States"]}
