Getting your Trinity Audio player ready...
Israeli mutual funds investing in local equities have outperformed those investing in global markets over the past six years, returning an average of 80.6% compared to 65.9% for funds focused on foreign stocks, according to an analysis by the Israel Securities Authority (ISA).
The study, covering 2019 through 2024, contradicts conventional wisdom, as the Israeli stock market suffered a temporary downturn following the October 7 terrorist attack and the subsequent war in October and November 2023.
According to the analysis, Israeli bond mutual funds posted 17.9% returns over the period, compared to 11.7% for those investing in foreign bonds. Money market funds, which surged in popularity in 2023 and 2024, attracted NIS 115 billion ($31.5 billion) in investments and yielded 7.1% returns.
Money market funds are designed to generate returns similar to bank deposit rates but often outperform them, mirroring Israel’s central bank rate of 4.5%. Their key advantage is liquidity, allowing investors to withdraw funds daily, unlike fixed-term bank deposits.
<< Get the Ynetnews app on your smartphone: Google Play: https://bit.ly/4eJ37pE | Apple App Store: https://bit.ly/3ZL7iNv >>
Israel’s mutual fund industry is the largest short-term savings sector for Israeli investors, managing NIS 597 billion ($161 billion) across 1,607 funds as of late 2024. The sector experienced a NIS 141 billion ($38 billion) increase in assets under management in 2024, fueled by strong market performance.
The ISA review comes as it seeks tax benefits for mutual funds and other investment vehicles.
The analysis found that average management fees across the industry stand at 0.67%, comparable to fees in investment provident funds. Actively managed funds charge the highest fees at 1% annually, while ETF fees average 0.51%, index funds 0.31% and money market funds 0.17%.
Amid the market rally, 217 funds raised their fees over the past year. However, a separate review by Calcalist found that high fees do not guarantee better performance—six of the ten most expensive flexible funds significantly underperformed the industry average.