Advanced training funds are considered the best mid-term savings instrument for employees. In addition to the advantages of the employer contributions to employee accounts, advanced training funds also grant tax breaks for employees: if the money is withdrawn at the funds' six-year maturity, the accumulated capital gain is tax exempt.
Many peoples use advanced training funds as savings instruments for a variety of purposes, relying on the funds' managers to generate a positive return that will not merely preserve the value of the savings, but increase them. The problem comes when the fund managers have to deal with a prolonged stock market drought.
2008 was just such a drought, with stock markets worldwide in freefall, a credit crisis, and global recession. The "Globes" ranking of advanced training funds that have more than NIS 300 million in assets under management shows that just one of the 28 funds tracked had a positive return last year: the Classic Advanced Training Fund of Perfect YNE Capital Markets Ltd..
The Perfect Classic Fund was established at the beginning of 2008, in order to create a conservatively invested instrument. The fund had a return of 4.15% in 2008; not coincidentally, it has the industry's lowest proportion of risky investments (stocks and bonds with a BBB rating or less, and non-marketable assets), 5.24% of its total portfolio.
It is still advisable to consider Perfect Classic Fund's results guardedly, because it is too new to provide a real comparison with other advanced training funds. It should also be borne in mind that it is a small fund, with just NIS 324 million in assets under management, which it raised during the year.
Excluding the Perfect Classic Fund, the advanced training funds industry's results for the year were no different from the results of provident funds. Among the large advanced training funds, which have more than NIS 1 billion in assets under management, the best-performing fund was the Hishtalmut Fund of DS Securities & Investments Ltd. (TASE:DSIN), which had a negative return of 16.98% in 2008. The Hishtalmut Fund is the third largest advanced training fund, with NIS 3.29 billion in assets under management.
The Assaf Fund of Excellence Investments Ltd. (TASE: EXCE), which has NIS 1.35 billion in assets, is in second place, with a negative return of 18.07% last year. The Hishtalmut Fund of Clal Finance Batucha Ltd. (TASE:CLFN), with NIS 1.22 billion, is in third place, with a negative return of 19.37%.
Kahal Employees Supplementary Training Fund of Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), the largest advanced training fund, with NIS 6.66 billion in assets, is in fourth place, with a negative return of 19.7% last year.
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2009
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