Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
June 14, 2004 01:00 AM

Israeli privatization opens doors for money managers

Companies gearing up for more business expected as part of new law in January

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    By David Lipkin

    The privatization of the 137 billion shekel ($32.4 billion) Israeli pension fund market is expected to drastically alter the funds' investments, including the addition of investment overseas.

    International managers Deutsche Bank AG, Merrill Lynch & Co. Inc., Goldman Sachs & Co., Lehman Brothers Inc. and Canadian Imperial Bank of Commerce are reinforcing their offices in Tel Aviv in order to offer their foreign assets management services to pension funds. Insurance companies, provident funds and private hi-tech investors also are expected to diversify their investments internationally starting next January, when the capital gains tax from foreign and Israeli investments will be equalized at 15%.

    Too small

    Menachem Kali, chairman of the New Israeli Pension Funds Association, said the institutional investors cannot invest solely in Israel because it is too small a country to absorb all of the capital. But Mr. Kali emphasized the change will take some time, however, as members of the funds' investment committees will have to digest the change. He also expects more foreign investment managers to be opening offices in Tel Aviv and competing for the Israeli assets.

    The changes in the Israeli pension fund market began last year. Finance Minister Benjamin Netanyahu instigated a reform in order to save from collapse the seven large pension funds run by the Histadrut Labor Union and three company funds. The pension funds had funding deficits of 120 billion shekels. Mr. Netanyahu nationalized the pension funds, which have 1 million participants, and gave a government guarantee of 73 billion shekels in the coming years to subsidize the funds. This step was accompanied by the decision to take over the running of the funds, and special directors were appointed to prepare the funds for privatization.

    The Histadrut funds offered old-age pensions based on an employer contribution of 12% of salary and an employee contribution of 6%. For years, 93% of the pension assets were required to be invested in special government-linked bonds carrying an annual interest of 5.3%. (Under the reform, that 93% will gradually be lowered to 30% over several years.)

    The crisis in the pension funds began 25 years ago when a report found their assets and liabilities were out of balance, but no action was taken. A minor reform took place in 1995, when the government and unions agreed that the seven largest funds would stop enrolling new participants, and the government would try to assist in financing the deficits. Subsidiary funds were set up for new participants. These measures, however, did not succeed in overcoming the problem of the growing accumulated deficits of the old pension funds.

    Wide-scale reform

    In May 2003, the Parliament approved a wide-scale reform regarding the pension funds, which included changing investment restrictions. In addition to reducing to 30% the government-linked bond allocation, 50% previously had to be invested in exchange-traded bonds and 20% in Israeli and foreign equity.

    The Finance Ministry plans to privatize the pension funds by the year's end. Israel's largest insurance companies, such as Clal Insurance, Migdal Insurance (which is controlled by Generali of Italy) and Harel Insurance are expected to be the main bidders, as well as Bank Hapoalim, Bank Leumi and the Israeli Discount Bank. Merrill Lynch officials also have shown an interest and have informed the Finance Ministry it will not participate in a tender of advising on the selling of the pension funds.

    Two banks were chosen in mid-May to assist in the transfer of the pension funds from the government to private hands. Deutche Bank and Poalim Capital Markets will manage privatization of the new pension funds. Three funds will be privatized in the coming weeks, with the others expected to be privatized in the second half of 2004. The proceeds from selling the funds will be devoted to covering some of the government obligations to the funds.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing