Psagot Investment House Ltd. unit Psagot Provident Funds Ltd. is different from the investment house's other activities; unlike the company's mutual funds and portfolio management businesses, which developed through organic grwoth, its provident funds were acquired almost entirely from the banks. Two years ago, Psagot was one of the smallest companies in the provident funds sector, with NIS 1 billion in assets under management.
Following the acquisition of Gadish Global Financial Services (2007) Ltd. and provident funds from Prisma Investment House Ltd., Psagot Provident Funds is now the largest company in the sector, with NIS 45 billion in assets under management and a 17% share of the market. It is almost as large as the next two largest provident funds managers combined, and its market share equals that of Bank Hapoalim (TASE: POLI) before the Bachar committee forced the banks to divest their provident funds.
Psagot Provident Funds CEO Hagay Badash says, "Psagot's growth was strong and fast, within a short time. We consider provident funds, especially advanced training funds with tax breaks, as the right and best pension products for customers. It is a transparent product, with simple and easy portability. The entire accumulation is really yours, and you understand the management fees."
"Globes": You're the largest provident funds management company, but there are other products in the long-term savings market. You're weak in the pensions market, and you have no life insurance.
Badash: "Our distribution systems also market the Pisga Pension Fund, a joint fund with Ayalon Holding Ltd. (TASE: AYAL), and we're increasingly stressing pension funds. Our goal is to continue to expand in the long-term savings world, and we'll seek ways to get stronger. Just as we knew how to get strong in provident funds through acquisitions, we'll do the same in pensions."
What about acquiring an insurance company?
"We do not hold negotiations through the newspapers."
What is your consolidation plan?
"We'll reduce parallel provident funds and plans. In the first stage (which was completed in August - E.P.), we consolidated provident funds acquired from Bank Leumi and advanced training funds acquired from Bank Hapoalim. In the second stage, which will be completed by the end of October, we'll consolidate provident funds acquired from Bank Hapoalim. This will reduce the number of provident funds from 89 to 60, and we'll further consolidate them during 2010 until we reach compliance with the Ministry of Finance guidelines to have one provident fund of each type. After 2011, we'll apply the Chilean model."
Since the Bachar committee forced the banks to divest their provident funds, management fees have soared.
"There are processes that caused management fees to rise: cost of service, regulation, oversight, risk management, and advertising. We sell a product at a fair price. The maximum management fee permitted is 2% of assets management, and some management companies charge this. We don’t. Psagot's average management fee is 1.12%, and a small investor with NIS 20,000 pays 1.6%."
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2009
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