Altshuler Shaham Investment House is paying the price for the preference to continue to hold low positions in Israel. The domestic capital market continued to beat the major overseas indices, bringing the investment house to a significant lag in yields after competitors in the pension and provident industries, and from there the road to losing money to competitors was short.
Altshuler Shaham It is still the largest in the provident fund world, and currently manages about NIS 205 billion in provident funds and study funds – 30% of the industry. But total assets fell from NIS 215 billion within four months. Since July, competitors in the camel market have been able to transfer more money to them from Altshuler Shaham than the investment house has transferred to it from competitors. In the past seven months, Altshuler Shaham lost an astronomical sum of NIS 15 billion to competitors, 3.4 billion of which in January alone.
First pension loss
The outflow of funds is so significant that even the large growth in monthly deposits, achieved thanks to the high returns presented by the investment house from the middle of the previous decade and making it a provident market star, did not prevent the accumulation in provident funds (summary of deposits, public withdrawals from funds)
By comparison, the biggest competitors in the field of camels – the Phoenix, Meitav Dash and Moore, who replaced Altshuler Shaham as the star of the yields on the mast, have recorded tremendous growth in the last 12 months. Moore has raised more than NIS 13 billion from competitors since February 21, and Phoenix and Meitav Dash have each raised more than NIS 6 billion.
If until now Altshuler Shaham could have been pleased that the pension fund continued to raise savers from competitors, January data show that here too the fund has lost money to the other funds. For the first time since it began operating in August 2008, Altshuler Shaham’s pension fund ended a month with a negative cash flow, which amounted to NIS 80 million. In doing so January will put the final stamp on a trend that began long before that. In March 2021, Altshuler Shaham’s pension fund transferred almost a billion shekels from its competitors, but in August the amount was already half that amount and in January, as mentioned, the pension fund began receiving requests for large-scale transfers of funds rather than new applications.
Who the agents care about
Factors in the long-term savings world attribute first and foremost the trend to yields, a significant growth engine for investment houses. They are an attraction to new clients who generate management fees – the bread and butter of investment managers – and just as importantly, prevent existing clients from leaving.
“Altshuler Shaham built the entire pension portfolio on the good returns he achieved,” said a source in the pension market. “The daily conduct with the agents was reasonable, no more than that, and they were very strict in complying with the regulatory requirements and required permits that no other body had requested.”
Another industry source points out that the move depends on agents who take care of transferring customers in order to receive commissions from the body to which the funds are transferred. “Insurance agents love big stories like the fall of Altshuler Shaham in applause, and here’s such a story they can show to customers.”
Altshuler Shaham is well aware of the power of agents, so much so that 70% of their portfolio is marketed by agents. In the last quarter of 2021, they went out in a joint move with several large agencies in which bonuses will be distributed to agents who succeed in increasing sales, bonuses that could have reached thousands of shekels, but did not seem to be enough to stop the flow of funds.
A change in the investment mix
Despite the difficult year in terms of returns, market estimates are that the wheel is likely to turn around again. The investment house has already significantly changed the mix of investments and exposure to the various markets. The main change, in the last three months, is in reducing exposure to China and increasing exposure to the US. Investments also shifted from Europe to the US, mainly to the index S&P 500 .
The Shenzhen Stock Exchange, China / Photo: Shutterstock
In addition, increased exposure to Israel, although not significant, from about 15% to 16.5%. This rate is still low compared to competitors, and it is due to the fact that Altshuler Shaham does not consider the Israeli market a liquid market, so in the event of a significant event in the capital market, they will have difficulty making a quick change in the portfolio mix.
The price of exposure abroad
The investment house has built itself up thanks to aggressive investments and exposure to large stocks, especially abroad, and he believes in them. A look at its stock exposure rates vis-à-vis competitors reveals that in January it is still much more exposed to stocks. Altshuler Shaham has a 57% share exposure compared to Moore’s 48% and Meitav Dash’s 44.5%, and its exposure abroad is also very high at 60.3%, compared to 39.3% in Moore and 36.7% in Meitav Dash.
These exposures have caused Altshuler Shaham to be severely affected by the falls in shares of Chinese tech companies that have suffered from regulatory restrictions by the regime in the past year as well as the bursting of the technology bubble in the U.S.
For example, Altshuler Shaham was affected by his holding in the company Weeks . Altshuler Shaham’s quarterly holding report to the US Securities and Exchange Commission (SEC) shows that at the end of 2021 the investment house held about 980,000 shares in Weeks, whose current value is $ 84.3 million – after a $ 29 million drop in holdings within days.
Stocks down
However, despite the relatively weak returns, the first nine months of the year ended with Altshuler Shaham’s provident and public pension company with a profit of NIS 184 million, double what it recorded in the first nine months of last year.
The increase in provident funds and pensions in recent years has made Etchuler Shaham a “monster” in the local market, with assets worth about NIS 195 billion that he manages following impressive organic growth. To this must be added the assets of Psagot that remain in his hands, amounting to about NIS 44 billion, after he was forced to sell part of the activity to Harel, a sale for which he brought in an amount of about NIS 185 million.
Despite the increase in net profit, Altshuler Shaham’s weak returns are reflected in the fall in the share price of the provident and pension company, which has lost more than 30% since the completion of the acquisition of Psagot in May. However, since the IPO in July 2019, the stock has recorded a return of more than 150%, and it reflects the company’s current value of NIS 3 billion.
The mergers have resulted in a different customer strain Interpretation, Etty Aflalo
Gilead Altshuler He is one of the oldest and most experienced investment managers in the Israeli capital market, with opinions and a solid agenda. When Altshuler Shaham was a small investment house before the prey of the Bachar reform acquisitions and mergers, whoever came to it knew exactly what it was getting: an investment house run by an investment man with a clear agenda and analytical and orderly investment analysis, who believes in aggressive investing, with a relatively high risk appetite. In the market then.
The chain of mergers that the capital market has gone through since then has created quite a few weird beasts: risk-averse executives alongside colleagues who have come from very solid places. A clear example was the acquisition of Bank Yahav Bank’s provident funds by Hellman Aldubi Investment House. The two executives of Hellman Aldubi, who are very exotic investment enthusiasts, received a pile of civil servants who love PCMs, and it did not always work.
Altshuler Shaham has also made its way from an investment house for those who understand only, to the largest investment house in Israel, among other things through mergers, with the latest merger in which it acquired Psagot’s assets created for Latchuler Shaham also an anomaly. Psagot’s portfolio was the so-called “market portfolio”, in other words, the average. In the capital market when you manage high-volume assets, much more important than being first in the table, it is not to be the last. Therefore, as the largest institution, Psagot did not create a portfolio that hit the market, but would give a return that would be enough to keep customers, assuming that a significant portion of them are not necessarily risk takers, but more sensitive to loss. Altshuler acquired these assets, and he received these customers. Customers who did not consciously choose him due to his high corporate debt analysis capabilities, who are not risk-takers and long-term market shakers, but those who have discovered that they have moved from one manager, to another, in a mail sent to them.
As with any merger between public finance managers, the process of merging Psagot’s asset portfolio into Altshuler included changes and adjustments to the securities that were in the members’ portfolios. Thus, Altshuler Shaham suddenly becomes the market portfolio itself, and on the way he discovers that when it is the market itself, customers’ patience for losses, for positions that may prove themselves in the long run, and for risk, is lower.