Israeli Knesset Approves Law to Regulate Public Hedge Funds and Expand Investment Options

The Israeli Knesset has passed a significant amendment to the Joint Investment Trust Law, part of a broader bill aimed at encouraging capital investments. This amendment removes uncertainty over approximately 5.7 billion shekels managed in public hedge funds operating under a temporary provision set to expire in early 2027. These hedge funds, established in recent years, allow the general public to invest in advanced strategies like short selling and complex trades under strict government supervision, previously accessible only to high-net-worth investors.

The law's approval in its second and third readings grants permanent legal status to these hedge funds, preventing their planned closure and enabling the Israel Securities Authority to approve dozens of new funds awaiting launch due to strong market demand. Additionally, the legislation introduces "private investment funds in trust" with up to 15-year terms, permitting public investment in non-traded assets such as real estate, infrastructure, and high-tech companies under regulated conditions. To mitigate risk, these funds cannot invest more than 12% of their assets in a single borrower or asset.

The amendment also addresses commercial securities, which are short-term loans companies raise from the public instead of banks. It allows extending their maturity annually up to five years, replacing the previous requirement to repay within one year and repeatedly refinance, which was costly and cumbersome.

Sefi Singer, Chair of the Israel Securities Authority, described the law as a crucial step in expanding regulated investment products for retail investors, enabling hedge funds in trust to operate long-term rather than as temporary offerings. Nimrod Sapir, CEO of the Investment Houses Association, emphasized that the amendment democratizes access to sophisticated investment products once limited to wealthy investors and paves the way for future regulated alternative mutual funds accessible to the public.