In 2021, the volume of financial assets of the Israeli public increased by 14% to NIS 5 trillion. This is according to the report on the public’s financial assets portfolio published by the Bank of Israel. In the fourth quarter, the public portfolio added NIS 222 billion.
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The quarterly increase was mainly due to an increase in the rest of the shares in the country at a rate that reached 12.5% of the total portfolio. As of the end of 2021, the average investment portfolio of an Israeli included a double share of shares, in relation to 6.5% in bonds and 5% in cash.
In the public investment portfolios, the balance of shares in Israel climbed by 33% in 2021 to NIS 815 billion. The balance of cash and deposits increased to NIS 1.9 trillion.
The public’s financial assets portfolio report is published quarterly and reviews the changes in the aggregate data of savings in the economy – stocks, bonds and cash. The report includes the financial assets of the Israeli public in the private investment portfolios as well as in the various savings instruments such as pensions and study funds.
The Bank of Israel’s data indicate, in a sense, the disengagement of the capital market from the Israeli real economy. This is because in 2021 the economic product increased by 8.1%. That is, the rate of financial recovery was faster than the rate of recovery of the real economy. At the end of 2021, the volume of the asset portfolio accounted for 3.7% of total GDP, its highest rate ever.
Regarding overseas exposure, throughout 2021 there was a 0.7% decrease in the foreign assets of the public. In the fourth quarter, the overseas exposure of the financial investment portfolio decreased by 5.1 billion, a rate of 0.7%. The balance of investments abroad amounted to NIS 766 billion at the end of the fourth quarter, constituting approximately 15% of the total asset portfolio. The balance of shares abroad decreased by NIS 2.5 billion, a decrease of 0.4% and stood at NIS 599 billion at the end of the quarter. The shekel alongside redemptions of holdings in shares.
Similar to 2021, the first two months of 2022 were also characterized by an excess return of the domestic stock market over the markets in the rest of the West. Therefore, the exposure abroad in the asset portfolio is expected to continue to decline and even at a more significant rate.
Institutional holders hold 48% of the public’s financial portfolio
The main beneficiaries of the increase in the financial portfolio are the institutional bodies. According to the Bank of Israel publication, institutional investors hold 48% of the public’s financial portfolio. The balance of the portfolio managed by institutional investors increased by NIS 120 billion in the fourth quarter (an increase of 5.3%) and ended up at NIS 2.4 trillion. In annual summary the balance of the institutionalized achieved the general increase when it increased by 17%.
According to the Bank of Israel, the increase in institutional assets was mainly due to the new pension funds, which grew by NIS 39 billion. Similar to the general portfolio of the public, the high exposure of pension funds in the general track led to high returns at a rate of 16% and helped in asset growth.