Altshuler Shaham's Investment Fund Posts Positive Return Amid June Market Turmoil

In June, a month marked by significant volatility in global and Israeli financial markets, Altshuler Shaham's investment fund stood out as the only provident fund to deliver a positive return. While most general track provident funds recorded negative yields, Altshuler Shaham's fund ended the month nearly flat with a 0.04% return. This performance was largely attributed to its higher exposure to markets outside Israel and a notably low weighting in major U.S. technology stocks.

The month saw sharp declines in Israeli and U.S. markets triggered by escalating security tensions in the Middle East and concerns over their global economic impact. Major U.S. tech stocks, especially the so-called "Magnificent Seven," experienced steep sell-offs after prolonged gains, amid investor uncertainty about the economic returns from heavy investments in artificial intelligence. The Tel Aviv 125 index fell by 9.5%, and the Tel Aviv 35 dropped 8.7%, while the S&P 500 and Nasdaq declined by only 1% and 0.2%, respectively.

Altshuler Shaham, known for its overseas investment focus, benefited from geographic diversification and avoided overexposure to regions hit hardest by the downturn. Investment manager Lea Freminger explained that while Israel and U.S. markets declined, European markets rose, contributing positively to returns. The fund also reduced currency hedging amid a sharp drop in the dollar to about 2.9 shekels, effectively increasing dollar exposure. Additionally, the fund prefers a relatively short duration bond portfolio, anticipating continued rapid interest rate declines due to low inflation expectations.

Regarding U.S. equities, the fund maintained a significant underweight position in the "Magnificent Seven" stocks, which fell about 10%, reflecting caution about when AI investments will yield economic returns amid intensifying competition. Instead, the fund favors companies benefiting from the AI race, such as chip manufacturers and infrastructure technology providers. Freminger emphasized the importance of broad global diversification and tailoring equity exposure to individual investor profiles rather than chasing short-term trends.

In the June rankings of general track provident funds, Harel Insurance ranked second with a -0.43% return, followed by Meitav, the largest fund managing 3.5 billion shekels, with a -0.47% return. Analyst fund ranked last with nearly a 1% loss but leads the sector over three years with a cumulative 47% return. Despite June's weak performance, the Israeli capital market remains positive year-to-date, with the Tel Aviv 125 index up 9.8% and general track provident funds averaging about 6% returns since January.