The foreign mutual funds hold the shares of about 150 Israeli companies traded in Tel Aviv, of which 75 companies at a rate that constitutes over 3% of the public’s holdings in them.
About 88% of the investments of foreign mutual funds in shares traded in Tel Aviv are made through geographical mutual funds.
background
In recent years there has been a trend of a sharp increase in total mutual fund investments (ETFs) in Western markets.
More and more investors have chosen to invest in the capital markets through index-linked mutual funds. The advantage of these mutual funds is that they are a passive, accessible and simple investment tool with lower management fees than active mutual funds, and unlike them, mutual funds are traded on the stock exchange continuously throughout the trading day.
The jump in total mutual fund assets applies to both the United States and Canada, as well as Europe. In the United States, for example, total holdings in mutual funds rose from about $ 2.5 trillion at the end of 2016 to about $ 3.4 trillion at the end of 2018. $ 1 trillion as of October 2021. In Europe today, the mutual fund market, which is also on a sharp upward trend, amounts to about $ 1.4 trillion. In Israel, the capital market underwent a reform of the transition from ETFs to ETFs in the fourth quarter of 2018, when at the end of 2018 the total assets of mutual funds amounted to NIS 86 billion, and currently the value of the ETF market on stock indices amounts to NIS 102 billion. NIS.
These mutual funds mostly follow stock indices, and a smaller number follow bond indices.
In light of this, foreign mutual funds that monitor international indices, which include shares traded on the Tel Aviv Stock Exchange, have an impact on the local stock market.
This article deals with the holdings of foreign mutual funds in shares traded on the Tel Aviv Stock Exchange.
Foreign mutual funds hold the shares of about 150 companies traded on the Tel Aviv Stock Exchange, of which about 75 are companies whose holdings are significant and constitute more than 3% of the public holdings in them, in some cases (in which the share is also held by thematic / industry mutual funds) They constitute even 5% or more of the public holdings.
Israeli companies, which are traded on the Tel Aviv Stock Exchange, are also exposed in the international markets through their inclusion in the international indices, and allow foreign investors to invest in those companies through funds that follow the same indices. Large companies on the Tel Aviv Stock Exchange can gain exposure both by entering the local indices of the Tel Aviv Stock Exchange and by entering international indices. The exposure of the companies also raises the need to increase their activity vis-à-vis foreign investors, by way of reports in English and increasing the activity of investor relations.
The managers of the largest mutual funds in the world hold Israeli shares
The funds of the two largest ETF managers in the world, Vanguard and Blackrock (iShares), constitute the majority of foreign mutual funds’ holdings in shares traded on the Tel Aviv Stock Exchange. Foreign, Vanguard holds about $ 3.1 billion, and BlackRock holds about $ 2.3 billion.
At a considerable distance after the above two are the mutual funds of Schwab, Invesco and ARK.
It is worth noting that Vanguard holds larger mutual funds in terms of total assets under management in each fund relative to Blackrock’s iShares funds, which offer a wider range of funds and a much larger number than Vanguard.
The two largest mutual funds belong to Vanguard, and each holds about 72 shares on the Tel Aviv Stock Exchange –
VXUS, which tracks the FTSE Global All Cap ex US Index, holds a total value of about $ 1.7 billion in Tel Aviv shares (which is about 0.42% of the fund’s total holdings).
VEA, which tracks the FTSE Developed All Cap ex US index, holds shares in Tel Aviv with a total value of approximately $ 0.9 billion (approximately 0.56% of the fund’s total holdings).
The next two funds in terms of the level of holdings in shares on the Tel Aviv Stock Exchange are BlackRock iShares funds, each of which holds approximately 75 shares on the Tel Aviv Stock Exchange –
IEFA, which tracks the MSCI EAFE IMI index, whose holdings in shares on the Tel Aviv Stock Exchange amount to a value of approximately $ 0.7 billion and constitute approximately 0.7% of the fund’s managed assets.
SCZ, which tracks the MSCI EAFE Small Cap Index, whose holdings of about $ 0.35 billion make up about 2.3% of the fund’s assets.
ARK’s IZRL ETF, which invests in Israeli technology companies (ARK Israel Innovative Technology ETF), includes about 75 shares with total assets under management of about $ 0.27 billion, of which 40 shares are held on the Tel Aviv Stock Exchange worth about $ 0.15 billion. dollar.
The indices are followed by foreign mutual funds
Most foreign mutual funds follow the indices of the two international index companies: FTSE and MSCI.
The main FTSE indices that include companies traded on the Tel Aviv Stock Exchange and followed by mutual funds are geographical funds:
The FTSE All Cap indices include about 72 shares on the Tel Aviv Stock Exchange (Large, Mid & Small Cap), as of the end of October 2021. About half of them are medium-large companies with a market value of about $ 2 billion or more, and about half are considered by FTSE as -Small Cap and Schwein stands at at least $ 0.5 billion.
MSCI’s main indices, which include companies traded on the Tel Aviv Stock Exchange and followed by mutual funds, are also geographical funds:
Currently, the minimum market value required to enter the standard indices (Large & Mid Cap MSCI) amounts to about $ 4.8 billion, and the value of the required public holdings is about $ 2.4 billion.
In the latest update of November 2021, MSCI’s Small Cap indices included four shares traded in Tel Aviv – Electra Real Estate, Ferion, Retailers and Nakes. As of the end of November 2021, the Small Cap indices will include about 78 shares on the Tel Aviv Stock Exchange, which as of the end of October the value of the small ones amounted to about $ 0.5 billion.
S&P indices are also used as a base asset for funds of various executives, mainly industries such as:
S&P Global ex-U.S. Property Index.
S&P Global Clean Energy Index.
About 88% of the investments of foreign mutual funds in shares traded in Tel Aviv are made through geographical mutual funds.
While most of the funds that invest by geographic area are Vanguard and Blackrock, among the funds that invest not by geographic area (but by sector / thematic / ESG / dividend), fund managers like Invesco, DWS XTrackers, WisdomTree, and Global X stand out.
The stocks with the largest holdings by foreign mutual funds
Foreign mutual funds hold about 150 shares on the Tel Aviv Stock Exchange, while in medium-sized companies their holdings constitute 4% -3% of the value of the amount of floating volume in these companies.
About $ 5 billion, which is more than 75% of the total holdings of foreign mutual funds in Tel Aviv shares, are in shares of the Tel Aviv-35 index, and constitute on average more than 4% of the public’s holdings in the index shares.
In addition to the dual shares and the banks’ shares, the holdings in the renewable energy shares Enlighten, Energix, Doral and Nofar stand out, in which the proportion of holdings by foreign mutual funds is relatively high (over 5% of the public holdings) thanks to additional holdings by thematic funds In clean / solar energy companies, such as iShares and Invesco.
Mitronics also stands out thanks to investments by thematic funds in the field of robotics and artificial intelligence (AI) from Global-X and iShares.
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