Israeli Parliament Approves Hedge Fund and Alternative Asset Mutual Funds for Public Offering

The Israeli Knesset has passed an amendment to the Joint Investment Trusts Law, allowing investment managers to offer new hedge funds in trust to the public. Although hedge funds in trust have operated under a temporary directive from the Israel Securities Authority for the past three years, managing nearly 6 billion shekels, the new legislation formalizes their continued operation. These hedge funds combine traditional investment management with risk hedging strategies, and currently, 46 such funds exist. Additional investment managers who have been waiting to launch similar funds can now submit prospectuses to the Securities Authority, led by Safi Zinger, and present them to the public.

The law also permits mutual funds focused on alternative assets, which involve investments in non-transparent, illiquid assets. This move addresses the growing market where both small and large entities, including investment houses and insurance companies, have been marketing alternative investment funds with minimal regulation, sometimes leading to problematic and opaque ventures. By 2025, losses from such unregulated investments reached approximately 7 billion shekels.

To meet the demand from savers seeking investments outside the capital market, the new law enables the establishment of mutual funds specializing in alternative investments. Additionally, the legislation aims to expand investment in the economy by facilitating debt mutual funds that provide loans to small and medium-sized enterprises, thereby supporting broader economic growth.