"In a few years, the proportion of overseas investments by institutional investors in Israel will reach 15-20%, compared with the present negligible proportion. Non-institutional investors are also expected to continue transferring some of their assets overseas," assessed Bank Leumi chief economist Dr. Gil Bufman.
Bufman predicted that the sharp shekel depreciation, which followed several years of appreciation in real terms, will cause the transfer of many more funds overseas in the coming years. He added that the low return on assets in Israel caused by the economic situation would also lead Israelis to look for a higher return overseas.
Bufman noted that at the moment, institutional investors are not taking advantage of the quota of permitted overseas investments. For example, only 1.2% of investments by the provident and advanced training funds are in foreign assets, compared with the 5% limit. The pension funds held no overseas assets whatsoever, and life insurance plans also hold an negligible proportion of foreign assets, less than permitted.
Bufman also said that experience in Europe shows that institutional investors hold substantial proportions of their investments in other countries. The proportion is greater in smaller countries and where the capital market is smaller.
Published by Globes [online] - www.globes.co.il - on May 13, 2002