The month of February saw a repeat of a recent trend with money market funds raising more capital, and with more redemptions in other mutual funds. Overall, the mutual fund sector remained virtually flat in February, with a slight increase of NIS 200 million, as a result of further capital inflows in the money market, and positive returns achieved by most funds amid the market revival of the past month.
However, the capital raised and positive returns were almost entirely offset by ongoing redemptions in the various instruments, especially international mutual funds, which have continued to suffer low returns as they continue to be eroded by the strengthening of the shekel against key foreign currencies.
In spite of this, the improved stability in markets over recent weeks caused an easing in the rate of redemptions compared with January, which saw withdrawals running into billions of shekels.
Preliminary figures obtained by "Globes" reveal that Psagot Ofek Investment House Ltd. continued to lead in attracting new investment, raising NIS 850 million, most of it for its money market fund but also other instruments.
One of the main consequences of the current trend in capital raising and redemptions is that the mutual fund sector has become less profitable for fund managers. The current fund mix contains a significant number of funds whose managers are losing money since most money market funds now charge 0% management fees for the first few months.
Published by Globes [online], Israel business news - www.globes.co.il - on February 26, 2008
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