The Israeli capital market is continuing to draw foreign investment houses. The equalization of taxes on Israeli and foreign securities began to attract foreign investment institutions late last year, including large mutual fund management companies. An example is the collaboration between Franklin Templeton Investments (listed as Franklin Resources) (NYSE:BEN) and Ilanot Discount.
Another large company is joining the trend. Wellington Management Company of the US is launching Israeli activity. It is setting up a new offshore stock fund in cooperation with Forum Consulting and Business Development Ltd. of Israel. An official announcement of the start of activities will be made in a few weeks.
Although Israeli investors, especially individual investors, are unfamiliar with Wellington Management, it is one of the oldest and largest firms in the global market, with $430 billion in assets under management. Wellington Management currently manages 13 funds for the Vanguard group Inc.
Wellington Management is entering Israel in cooperation with Forum Consulting and Business Development, an investment bank founded in 1993 by president Ami Segal. The first venture will be a stock mutual fund that will invest overseas.
Segal says, "You should realize that we're talking about a huge firm in global terms, not Israeli terms. The Vanguard group has $900 billion in assets under management. These include many funds managed by Wellington and other companies with excellent performance. It's a real revolution when two such giants decide to come to Israel."
"Globes": How did you set up the relationship with Wellington?
Segal: "Bank of America (NYSE:BAC), which we work with, helped mediate the connection with the US company. We tried to attract Wellington several years ago, before the foreign currency deregulation and tax equalization, but they decided at the time that it wasn’t worthwhile.
"The picture changed about a year ago, when Wellington's managers decided that Israel's foreign currency deregulation and tax equalization made it an interesting market for the coming years. Since then, they've shown real commitment to the Israeli market, making regular visits to Israel, while Israeli investment managers have been making reciprocal visits to Wellington's offices in Boston and London."
The connection between the Forum Group and Wellington Management began with the establishment of an offshore mutual fund. Segal and Forum Group chairman Amir Geva, both veterans of Unit 8-200 (the IDF signals intelligence unit), founded the company. Together with Wellington Management, they have now announced the establishment of an offshore fund, listed on the Irish Stock Exchange, to invest overseas.
This is Forum Group's second family of funds. The first was "Forum Global Fixed Income", which specializes in international bonds, and has been traded since October 2003.
Segal says, "The new fund is specially suited for the needs of top-flight Israeli investors, who want to transfer some of their investments abroad. The fund mainly invests in securities of S&P 500 companies, and is managed by American investment managers."
Do you see demand from Israelis for this type of fund, when there are quite a few local funds doing the same thing?
"We've identified a growing wish by Israelis to diversify their investment portfolios, and spread risk overseas, while paying great attention to the quality of management. The fact that taxes on investments in the US capital market have been equalized since January has caused many Israelis to increase their exposure to that market, and not only in shares of Israeli companies listed on Nasdaq, as is current practice."
Published by Globes [online], Israel business news - www.globes.co.il - on February 15, 2005