Israel Emerges as Significant Capital Market Beyond Tech Hub

Israel is increasingly recognized not only as a technology and innovation powerhouse but also as a significant capital market, attracting international investment managers. Itai Elnatan, CEO and Managing Partner at Leader Private Capital, stated at the Israel Private Markets Summit that the growth of institutional bodies and private wealth has enabled Israeli investors to participate more extensively in leading global investment funds. This development is supported by Israel's strong economic fundamentals, with per capita GDP projected to reach approximately $72,000 by 2026, placing it among the top ten OECD countries. The country also leads the OECD in R&D investment relative to its GDP.

Public financial assets in Israel have surged to a record 7.6 trillion shekels, more than doubling since 2016. Since October 2023, these assets have grown at an annualized rate of 14.6%, significantly faster than in previous years. Institutional bodies now manage around 3.4 trillion shekels, up from 1.3 trillion a decade ago, with net deposits expected to exceed 140 billion shekels by 2026. Concurrently, the private wealth market is expanding, with approximately 195,000 dollar millionaires in Israel, and about 82% of private wealth held in financial assets, the second-highest rate globally.

Despite this growth, Israeli institutions' average exposure to private markets is only about 9%, considerably lower than in Europe (19%) and North America (28%). Elnatan noted that this average masks significant variations among institutions. Currently, institutional investors hold about 384 billion shekels in cash versus approximately 300 billion shekels in private investments, reflecting caution during periods of security and geopolitical uncertainty, alongside sharp rises in public markets. While institutional assets grew by 16% in the year ending June 2026, private investments remained largely unchanged, causing their weight to decrease from 10.4% to 8.9% due to the denominator effect.

However, signs of renewed activity are emerging, with uncalled commitments to private funds increasing by 18% in the first half of 2026 to about 98 billion shekels, with roughly 80% of these allocations managed by foreign fund managers. Private equity leads the private investment portfolio, followed by real estate, private credit, and infrastructure, with growing interest in secondary investments, credit, and value-add strategies. Elnatan cautioned that investing in illiquid assets carries risks and requires professional expertise to select managers capable of generating excess returns, citing significant performance gaps between top and bottom-tier managers.

He emphasized the need for a shift from rigid asset allocation to a Total Portfolio Approach, evaluating each investment based on manager quality and its contribution to the overall portfolio. Elnatan highlighted the sophistication of Israeli institutional private market teams, which now often exceed public market analyst teams. In contrast, he warned that private investors often enter investments without adequate expertise, relying on recommendations and sometimes losing their capital. Leader Private Capital, a consulting firm specializing in private markets, facilitates this process by representing international fund managers to Israeli institutional investors and managing dedicated funds.