In recent weeks, three Israeli investment houses - Psagot Ofek Investment House Ltd., DS Apex Holdings Ltd. (TASE:DSAP), and Gaon Investment House Ltd. - have suspended their collaboration with foreign investment houses in the area of mutual funds. The original idea was straightforward: the foreign partner, either a well-known institution or a boutique specializing in a particular instrument, would manage the investments; while the Israeli fund manager would take care of day-to-day operations and marketing of the fund. The parties would split the management fees.
The Israeli investment houses had hoped that the reputations of their foreign partners would attract Israeli investors and that they would be able to raise large mutual funds. Things did not work out that way, and the relevant mutual funds raised only a few tens of millions of shekels.
Two and a half years ago, Psagot Ofek launched its first collaborative venture with a foreign investment house - Harris Alternatives LLC, a unit of Natixis Global Asset Management Group through IXIS Asset Management US Group. The Psagot Harris USA mutual fund invests in US value stocks. It amassed NIS 62 million in assets. Psagot Ofek recently announced that it was ending its collaboration with Harris and that the mutual fund would invest in US growth stocks.
Psagot Ofek also collaborates with its parent company, York Capital Management LLC. The first Psagot York mutual fund has raised almost NIS 200 million. There is also a Psagot York Portfolio mutual fund and the investment houses are expected to launch another fund soon.
In February 2007, Gaon Investment House teamed up with investment house Brandywine Global Investment Management, LLC, a subsidiary of Legg Mason Inc. (NYSE:LM). They launched two mutual funds: Gaon Brandywine Overseas Stocks and Gaon Brandywine Global Bonds.
At the time of the launch, then-Gaon Investment House CEO Shay Barak told "Globes", "I predict that we'll raise NIS 700-900 million in the coming year, mostly by the bonds fund."
The actual results were somewhat short of the mark. The two mutual funds raised about NIS 50 million altogether, and Gaon Investment House and Brandywine are severing their relationship.
Gaon Investment House said, "After almost two years of working together in overseas mutual funds… we have reassessed the substance of this collaboration. Consequently, we decided at our own initiative to replace Brandywine with KCPS & Co. in order to cooperate with a company of the highest professional level. KCPS has offices in both Tel Aviv and New York."
DS Apex is also severing its ties with Sectoral Asset Management Inc. of Canada, which specializes in healthcare, generics, and biotechnology companies.
To date, only IlanotBatucha Ltd. has recorded success with its foreign partner. 15 years ago, it was the first investment house to sign a cooperation agreement with a foreign firm Neuberger Berman LLC a unit of Lehman Brothers (NYSE:LEH), with the launch of the Ilanot US Equity mutual fund. Later, Ilanot Batucha signed cooperation agreements with HSBC plc (NYSE:HBC; LSE:HSBA) and Franklin Templeton, a unit of Franklin Resources Inc. (NYSE:BEN), and these joint mutual funds have raised an average of NIS 150 million each.
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2007
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