Identical Pension Fund Names Mask Vast Differences in Investment Returns in Israel
Two pension savers who selected investment tracks with identical names but managed by different institutional bodies could experience nearly a 40% difference in returns within a single year. This discrepancy is not due to management fees or investment quality but stems from the fact that identical fund names often conceal fundamentally different investment strategies. Some institutions allocate nearly 100% of their portfolio to the Israeli capital market, while others invest almost entirely overseas. For savers, the fund name provides little indication of how their money is invested.
This issue is significant because pension savings constitute the most important financial reserve for most Israelis, with nearly 21% of employees’ salaries contributed monthly to pension funds. The total assets managed by new pension funds under insurance companies and investment houses have surpassed one trillion shekels. While most savers are automatically assigned to age-based tracks, an increasing number are independently choosing their investment paths, including two new tracks introduced in the last two years: tradable equities and mixed tradable equities. These were created to expand investment options and offer lower management fees.
The Capital Market Authority standardized fund names but did not impose uniform investment policies or geographic exposure limits, resulting in identical-named funds having vastly different investment compositions and returns. For example, as of May 2026, the popular equity track managed 113 billion shekels, while the two new tracks combined managed about 15 billion shekels. In the tradable equities track, Clal Insurance’s fund achieved a 47.5% return over 12 months ending May 2026, while Meitav’s comparable fund returned only 7.4%, a nearly 40% gap.
The root cause is the split in investment strategies: some funds focus almost entirely on the Israeli market, others on foreign markets. This contrasts with the broader pension industry trend of increasing foreign exposure to diversify risk, with about 50% of pension assets and 40% of equity assets invested abroad. The Israeli market’s 33% rise in the past year outpaced the S&P 500’s 20% gain, but a 10% depreciation of the dollar against the shekel reduced foreign returns to about 10% in shekel terms. Consequently, funds concentrated in Israel posted the highest returns and attracted significant inflows.
However, concentrating nearly 100% of investments in one geographic market contradicts the fundamental investment principle of risk diversification. In 2023, for instance, the Tel Aviv 125 index rose only 4%, while the S&P 500 gained 24% (27% in shekel terms), showing the benefits of foreign exposure in some years. Critics argue the new tracks created confusion because identical names mask different products, making it difficult for customers to compare funds effectively. Although investment policies are published online, they are not easily accessible or understandable for average savers.
The mixed tradable equities track, which includes a broader range of securities beyond stocks, also shows dramatic differences between managers, with returns ranging from 43.1% at Meitav to 7.5% at Harel Insurance. The Capital Market Authority monitors the reform’s implementation and will consider changes if necessary. Meanwhile, the complexity of these options increases the need for professional guidance, even as the Authority seeks to reduce insurance agents’ influence, who traditionally help savers choose suitable investment tracks.
