Against the background of the fear of the potential economic effects of the judicial reform, alongside the diminished returns of the local market due to macroeconomic factors, Israel’s institutional pension funds in January increased their exposure to foreign markets by NIS 14 billion ($3.8 billion), Calcalist reported Wednesday.
The pension funds essentially took the savings of retired Israelis abroad, raising the average rate of pension funds’ “exposure” by 1.67% and provident funds by 0.93%. This is in contrast to the trend in 2022 where the same financial institutions worked to reduce exposure abroad and increased their involvement in the local market.
Israel’s pension and provident funds control about $1.3 trillion, which makes their decision to migrate the savings of unsuspecting retired Israelis as part of what may be political manipulation quite alarming.
The provident fund that recorded the sharpest increase in exposure abroad is Altshuler Shaham, which manages the largest amount of assets in the pension industry, NIS 144 billion ($39 billion), increased its exposure abroad by almost 3% within a month, while disbursing NIS 4.2 billion ($1.14 billion). The fund’s current rate of exposure abroad is 53.2% of its assets.
But Altshuler Shaham’s decision to move its funds abroad may have less to do with its fear of the repercussions of Yariv Levin’s reform and more with the fact that it has been on a scary losing streak: its clients have transferred NIS 3.3 billion ($90 million) of the firm’s assets to its competitors, putting Altshuler Shaham’s overall losses since June 2021 at NIS 70 billion ($19 billion).
How did the late great Senator Everett McKinley Dirksen of Illinois put it? “A billion here, a billion there; pretty soon you’re talking about real money.”
The failures of the Israeli market’s biggest contender notwithstanding, Eran Kalinsky, VP of Investments at Mor pension and provident fund stuck with the boogie man story. He told Calcalist on Tuesday: “We saw the scenario of the legal revolution materialize and we felt that the level of risk here was increasing, so we decided to increase the exposure abroad.”
He then adjusted his statement, admitting, “Regarding half of the funds we took out of the country in January, I would say that we did it in response to the reform.”
Bringing to mind another late great American lawmaker, Ben Franklin, who said, “Half the Truth is often a great Lie.”
Political arsonists such as Yesh Atid Chairman and former interim PM Yair Lapid have been hailing the severe drop of the Shekel as proof to their point that the judicial reform is bad for business. As of Wednesday morning, one US dollar will get you 3.68 Shekel. It’s bad news indeed to Israelis who are shopping on Amazon and Abu Ali Express for the latest sneakers endorsed by a rap star.
For Israeli exports, on the other hand, a weaker shekel is the a shot in the arm they’ve been yearning for, boosting the marketing capacity of everything, from tourism to tomatoes.
