Unless something dramatic happens in the two weeks left until the end of the year, the investment managers in the institutions that manage the public’s savings can sum up 2023 as a positive year. The equities tracks will end the year with average positive returns of over 11%, and if December ends as well as it started, the general tracks at some of the institutions will also record double-digit returns.
Who, then, are the outstanding investment managers of 2023? In the general advanced training funds, Infinity stars. This is a small fund, with tens of millions of shekels under management, rather than the billions in the equivalent funds of the large investment houses and the insurance companies. In fact, being small helped Infinity, which has posted a return of 11.7% for 2023 to date, followed by Yelin Lapidot, with 9.3%, and Analyst, with 9.1%.
In the equities funds, Analyst leads with an exceptional return of 18.2%, followed by Yelin Lapidot, with a high 16.2%. Altshuler Shaham recovered this year and is ranked joint third with Meitav with 11.5% each. Incidentally, Infinity’s overseas stocks fund has a return of over 20% so far this year.
"What worked in our favor is that we had high exposure to US stocks, we managed the dollar-exposure risk well, and we focused on sectors that rose well, such as semiconductors," explains Amir Ayal, chairperson and owner of Infinity.
The funds managed by the insurance companies are at the bottom of the table, in both the general and the equities tracks. Migdal is the only one of the insurance companies with a double-digit return on the equities tracks, and it also heads the sector in the general track.
"The advantage of the small investment houses is very dramatic and has to be exploited," a capital market source says. "The insurance companies, which have NIS 200 billion or NIS 300 billion under management, have a problem. In Israeli terms, they are too big, and so in order to generate a return they have to go overseas, but overseas they are often too small. So, for example, they invest in real estate projects around the world, but very often they can only invest in small projects, unlike the international investment giants, and there the returns are not as good as in top tier projects."
Carmel Kenny, chief investment manager of Yelin Lapidot Provident Funds says that some of the insurance companies that manage large amounts prefer to make large investment that enable them to invest a substantial sum even if that means compromising on the return they obtain. "Despite the attempt to present this disadvantage as a strategic advantage in investing in non-marketable assets, the actual results show that such investments, with all the risks of illiquidity that they involve, do not enhance the overall return of the portfolio," he says.
Of course, the year about to end was not just good for shares. Anyone who succeeded in taking advantage of the volatility in the debt market benefitted greatly from capital gains in the past two months, in addition to the high yields for ever lengthening periods as the high interest rate environment persisted. The year began with a 3.9% yield on ten-year US Treasury bonds. The yield jumped to a peak of 5% in October before falling back sharply to 3.9%.
Meanwhile, as world markets mostly rose, the Tel Aviv Stock Exchange lagged behind, and the shekel also weakened for most of the year, although it has recently corrected sharply.
"It started because of the political dispute, which led to a change in our mix and in that of most of the investment houses, with a greater weight given to investment overseas and an increased exposure to foreign currency, a trend that strengthened in October until the start of the war," says Guy Mani, chief investment manager for long-term investment at Meitav. "After that, however, we saw the rebound in the Israeli market, and in our view the gap between Israel and overseas markets, which even exceeded 255, is too great even if there is a war here. In our view, because of the effect of the war, the Bank of Israel will be the first to cut interest rate sin the developed countries, as early as the beginning of 2024.
"This expectation is mainly seen in real estate and renewable energy stocks, and their high weight in the Tel Aviv indices could be good for the stock market in Israel, and lead to a partial closing of the gap versus overseas."
As for the shekel-dollar exchange rate, Mani says that the shekel has gone back to being an appreciating currency. "I believe that the appreciation of the shekel partly stems from the assessment that, because of the war, the judicial overhaul, which was part of the risk premium that caused the shekel to weaken, is behind us - that, together with the fact that for the time being the war is limited to the southern front."
Published by Globes, Israel business news - en.globes.co.il - on December 18, 2023.
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