Israeli Mutual Funds See Inflows Despite Local Market Slump
Translated & summarized from Globes by baba
Israel's mutual fund industry saw 7.6 billion shekels in net inflows in October, bringing total assets to 859 billion shekels. Investors favored foreign equity funds over domestic ones, which experienced significant outflows. Money market funds also attracted substantial investments. Experts attribute the shift to political uncertainty in Israel and global economic pressures, predicting continued investor caution in the near future.
The story in 6 lines · by baba
- Israeli mutual funds attracted 7.6 billion shekels in October, despite local market declines.
- Investors shifted funds from Israeli equities to foreign equities, with domestic funds seeing 3.2 billion shekel outflows.
- Money market funds drew 3.7 billion shekels in October, becoming a preferred safe haven.
- Traditional active funds experienced their first outflows in 18 months, totaling 1.4 billion shekels.
- Political uncertainty in Israel and global economic factors are driving investor caution.
- Experts predict continued investor hesitancy and market sensitivity to political developments.
Israel's mutual fund industry attracted approximately 7.6 billion shekels in October, pushing total assets under management to around 859 billion shekels, a 13.5% increase since the start of the year. Despite a volatile international market and a downturn in the local stock market following election results, the industry experienced positive net inflows.
However, investor behavior revealed a selective approach. While foreign equity funds, both passive and active, saw substantial inflows of 7.9 billion shekels, domestic equity funds experienced outflows totaling 3.2 billion shekels. Lior Kagan, CEO of Meitav Mutual Funds, noted a reduction in Israeli investments in the past month, attributing it to pre-election uncertainty and the anticipation of a potentially unclear political outcome, which may have dampened investor confidence in the local market's momentum.
The Israeli stock market ended October with declines, with the TA-35, TA-125, and TA-90 indices falling by 3.5%, 3.4%, and 3.1% respectively. This occurred amidst mixed performance in US markets, where the Dow Jones rose 1.9%, the S&P 500 fell 0.9%, and the Nasdaq dropped 5.3%.
Passive funds, including ETFs and index-tracking funds, led the industry's inflows with about 4.8 billion shekels in October. The shift was particularly evident in ETFs, often used by institutional investors, which saw significant changes in foreign versus domestic holdings. Retail investors, primarily using index funds, showed minor outflows from Israeli funds (182 million shekels) and slight inflows into foreign funds (316 million shekels).
Money market funds were a significant draw, attracting 3.7 billion shekels in October and nearly 38 billion shekels year-to-date, managing a total of 222 billion shekels. Shai Yaron, Manager of Altshuler Shaham's mutual funds, explained that investors are currently adopting a cautious stance, preferring money market funds for their stable returns amid an uncertain market. He pointed to the Israeli market's negative momentum since May, inflationary pressures, and upcoming elections in both Israel and the US as contributing factors to this hesitancy.
Traditional active funds, which were popular last year, experienced outflows of about 1.4 billion shekels in October, their first such decline in 18 months. Kagan described these funds as a barometer for the Israeli market, reflecting private investors' reactions to market events. He anticipates a return of inflows if the market stabilizes and begins to rise, noting that current outflows are not substantial compared to recent years' inflows.
Looking ahead, Yaron expects these trends to continue in the coming weeks, with investors seeking clarity on political developments and market direction. Kagan added that the market will remain highly sensitive to political events and their outcomes, with many scenarios still uncertain.
