www.bethelfinance.com
Bethel Finance news:
Information rights management (IRM) solutions developer Covertix Ltd. has raised several hundred thousand dollars from Comsec Innovation, the investment arm of Israeli information security and risk management firm Comsec Consulting Inc., in a strategic investment.
Covertix was founded by Alon Samia and CTO Tzach Kaufman in 2006 at Iris Venture, the Sde Boker technology incubator in the Negev. It is currently based in Even Yehuda near Netanya. The company raised $1 million from Kima Ventures in its previous financing round in December 2010.
Covertix CEO Doron Zinger said, "We are currently accelerating our global sales and this strategic investment from Comsec significantly expands our sales reach and expands our access to opportunities, especially in Europe."
Covertix's flagship product, SmartCipher, is a file-level loss prevention and rights management application that secures and monitors confidential documents and sensitive data by traveling with the file inside and outside the organization. This meets enterprises' growing need to prevent leaks of sensitive data by providing independent file-level security, surveillance and protection
"By protecting information itself at the file-level, Covertix closes many of the security and risk gaps left open by standard DLP solutions intended to protect enterprises and their networks," said Comsec Innovation managing partner Yoran Sirkis. "With the growing rate of cyber attacks occurring worldwide, we are pleased to make a strategic investment in the company and are working closely with Covertix to raise the awareness of its IRM solution among our global client base."
Comsec Innovation says that the investment in Covertix is its first in a series of investments planned for 2012.
Wednesday, February 1, 2012
Bethel Finance: Tshuva: I did it my way at Delek Real Estate
www.bethelfinance.com
Bethel Finance news:
"This is my way; it's how I've worked all my life, and I know of no other," said Delek Real Estate Ltd. (TASE: DLKR) controlling shareholder Yitzhak Tshuva today about the company's partial debt settlement with the bondholders of two of its three bonds.
"I met the company's request to support the proposed debt structure, in the belief and wish to help it move forward," Tshuva added. "A great effort was made here by the bondholders and other parties to put the company on a new road."
Delek Real Estate today initialed an agreement with its holders of its Series 4 and 5 bonds, which account for NIS 1.4 billion of the company's bond debt, 75% of the NIS 2.1 billion total. The company's Series 25 bondholders refused to sign the agreement.
Labor Party chairwoman MK Shelly Yacimovich criticized Tshuva, saying that the settlement would cost savers NIS 1 billion. "Had this been an ordinary person owing NIS 1,000, he would have repaid every last shekel," she said.
Delek Real Estate's share price fell 11.7% today to NIS 0.242, giving a market cap of NIS 90 million.
Bethel Finance news:
"This is my way; it's how I've worked all my life, and I know of no other," said Delek Real Estate Ltd. (TASE: DLKR) controlling shareholder Yitzhak Tshuva today about the company's partial debt settlement with the bondholders of two of its three bonds.
"I met the company's request to support the proposed debt structure, in the belief and wish to help it move forward," Tshuva added. "A great effort was made here by the bondholders and other parties to put the company on a new road."
Delek Real Estate today initialed an agreement with its holders of its Series 4 and 5 bonds, which account for NIS 1.4 billion of the company's bond debt, 75% of the NIS 2.1 billion total. The company's Series 25 bondholders refused to sign the agreement.
Labor Party chairwoman MK Shelly Yacimovich criticized Tshuva, saying that the settlement would cost savers NIS 1 billion. "Had this been an ordinary person owing NIS 1,000, he would have repaid every last shekel," she said.
Delek Real Estate's share price fell 11.7% today to NIS 0.242, giving a market cap of NIS 90 million.
Bethel Finance: IBM acquires mobile app co Worklight for $50-60m
www.bethelfinance.com
Bethel Finance news:
IBM Corporation (NYSE: IBM) has acquired smartphone and tablet application developer Worklight Ltd.. No financial details were disclosed but the acquisition was reportedly for $50-60 million. This is IBM's 11th acquisition in Israel.
Worklight has raised $21 million since it was founded in 2006; its investors have therefore made a reasonable return on their money. Investors include Genesis Partners, Pitango Venture Capital, Index Ventures, and Shlomo Kramer, a founder of Check Point Software Technologies Ltd. (Nasdaq: CHKP) and Imperva Inc. (NYSE: ) CEO. Worklight was founded by CEO Shahar Kaminitz, a former Amdocs Ltd. (NYSE: DOX) executive for internet operations.
"Globes" named Worklight as one of Israel's most promising start-ups in 2010.
IBM "With this acquisition, IBM's mobile offerings will span mobile application development, integration, security and management. "Worklight will become an important piece of IBM's mobility strategy, offering clients an open platform that helps speed the delivery of existing and new mobile applications to multiple devices. It also helps enable secure connections between smartphone and tablet applications with enterprise IT systems."
IBM says that Worklight's revenue has more than doubled in the past two years, which means that its revenue was $5-10 million in 2011.
IBM has already acquired ten Israeli companies or companies with Israeli operations, and they have become an integral part of IBM's development operations. It has 1,100 employees in Haifa, Tel Aviv, Herzliya, Rehovot, and Jerusalem. Its largest Israeli acquisition was $140 million for Storwize in 2010.
Kaminitz said, "In the last year, we have seen surging demand from enterprises for mobility solutions that will support the unique set of challenges introduced by new smartphone and tablet platforms. Building on our existing partnership with IBM, the acquisition of Worklight further enhances IBM's broad mobile portfolio. Now it will be easier than ever for our clients to offer secure and connected applications to their customers, business partners and employees."
Worklight is headquartered in New York and has its R&D center in Shefayim, near Herzliya.
Bethel Finance news:
IBM Corporation (NYSE: IBM) has acquired smartphone and tablet application developer Worklight Ltd.. No financial details were disclosed but the acquisition was reportedly for $50-60 million. This is IBM's 11th acquisition in Israel.
Worklight has raised $21 million since it was founded in 2006; its investors have therefore made a reasonable return on their money. Investors include Genesis Partners, Pitango Venture Capital, Index Ventures, and Shlomo Kramer, a founder of Check Point Software Technologies Ltd. (Nasdaq: CHKP) and Imperva Inc. (NYSE: ) CEO. Worklight was founded by CEO Shahar Kaminitz, a former Amdocs Ltd. (NYSE: DOX) executive for internet operations.
"Globes" named Worklight as one of Israel's most promising start-ups in 2010.
IBM "With this acquisition, IBM's mobile offerings will span mobile application development, integration, security and management. "Worklight will become an important piece of IBM's mobility strategy, offering clients an open platform that helps speed the delivery of existing and new mobile applications to multiple devices. It also helps enable secure connections between smartphone and tablet applications with enterprise IT systems."
IBM says that Worklight's revenue has more than doubled in the past two years, which means that its revenue was $5-10 million in 2011.
IBM has already acquired ten Israeli companies or companies with Israeli operations, and they have become an integral part of IBM's development operations. It has 1,100 employees in Haifa, Tel Aviv, Herzliya, Rehovot, and Jerusalem. Its largest Israeli acquisition was $140 million for Storwize in 2010.
Kaminitz said, "In the last year, we have seen surging demand from enterprises for mobility solutions that will support the unique set of challenges introduced by new smartphone and tablet platforms. Building on our existing partnership with IBM, the acquisition of Worklight further enhances IBM's broad mobile portfolio. Now it will be easier than ever for our clients to offer secure and connected applications to their customers, business partners and employees."
Worklight is headquartered in New York and has its R&D center in Shefayim, near Herzliya.
Bethel Finance: Cartilage implant co CartiHeal raises $5m
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Cartilage implant company CartiHeal Ltd. has raised $5 million from Accelmed, the fund of Moshe (Mori) Arkin and Uri Geiger, and Access Medical Ventures, a US fund run by Israelis Limor Sandach, Dvir Keren, and Michael Tal. CartiHeal is a graduate of Peregrine Ventures' Incentive Technological Incubator.
CartiHeal CEO Nir Altschuler, a biomedical engineer, founded the company in 2009, on the basis of a concept discovered at Ben Gurion University of the Negev. The company previously raised $1.2 million.
CartiHeal's preclinical trial of its articular cartilage and osteochondral defect repair product, Agili-C, was successful, and enough for EU CE Mark certification. Altschuler said, "It is very unusual to obtain CE Mark without clinical trials, but the preclinical trial results were good enough."
CartiHeal will use the proceeds to financing marketing of its product in Europe, which it plans to begin in a year. The US is not a target market for now, due to the investment needed for a US Food and Drug Administration (FDA) protocol clinical trial, and the uncertainty of the registration. The product is also certified in Israel.
The cartilage reconstruction market is experimental, but promising. Companies developing stem cell-based products are the main companies in this segment, including Israel's Carticure Ltd., Regentis Biomaterials Ltd., and Prochon Biotech Ltd., which merged with a US company last year and is closest to bringing a product to market.
Companies in the cartilage reconstruction segment estimate the market at $1.6 billion a year, although most products are still only experimental.
Agili-C is in two parts. One made of aragonite, and the other made of aragonite and hyaluronic acid is biocompatible and biodegradable. It does not include living tissue, in contrast to most innovative products under development. "We found that these materials attract stem cells from the bone marrow, so that only cells in aragonite area turn into bone, and cells in the area of the aragonite and hyaluronic acid turn into cartilage," says Altschuler.
He says that the Agili-C is implanted through minimally invasive surgery, similar to an injection. "The cells gradually dissolve the implant, and within a short time, the implant can bear the body's weight and regular activity can be resumed," he says.
Cartilage implant company CartiHeal Ltd. has raised $5 million from Accelmed, the fund of Moshe (Mori) Arkin and Uri Geiger, and Access Medical Ventures, a US fund run by Israelis Limor Sandach, Dvir Keren, and Michael Tal. CartiHeal is a graduate of Peregrine Ventures' Incentive Technological Incubator.
CartiHeal CEO Nir Altschuler, a biomedical engineer, founded the company in 2009, on the basis of a concept discovered at Ben Gurion University of the Negev. The company previously raised $1.2 million.
CartiHeal's preclinical trial of its articular cartilage and osteochondral defect repair product, Agili-C, was successful, and enough for EU CE Mark certification. Altschuler said, "It is very unusual to obtain CE Mark without clinical trials, but the preclinical trial results were good enough."
CartiHeal will use the proceeds to financing marketing of its product in Europe, which it plans to begin in a year. The US is not a target market for now, due to the investment needed for a US Food and Drug Administration (FDA) protocol clinical trial, and the uncertainty of the registration. The product is also certified in Israel.
The cartilage reconstruction market is experimental, but promising. Companies developing stem cell-based products are the main companies in this segment, including Israel's Carticure Ltd., Regentis Biomaterials Ltd., and Prochon Biotech Ltd., which merged with a US company last year and is closest to bringing a product to market.
Companies in the cartilage reconstruction segment estimate the market at $1.6 billion a year, although most products are still only experimental.
Agili-C is in two parts. One made of aragonite, and the other made of aragonite and hyaluronic acid is biocompatible and biodegradable. It does not include living tissue, in contrast to most innovative products under development. "We found that these materials attract stem cells from the bone marrow, so that only cells in aragonite area turn into bone, and cells in the area of the aragonite and hyaluronic acid turn into cartilage," says Altschuler.
He says that the Agili-C is implanted through minimally invasive surgery, similar to an injection. "The cells gradually dissolve the implant, and within a short time, the implant can bear the body's weight and regular activity can be resumed," he says.
Bethel Finance: Finance Ministry Develops Comparative Rating Index of Sovereigns (CRIS)
www.bethelfinance.com
Bethel Finance news:
Major credit rating agencies give out the sovereign credit rating of each nation as an absolute grade. How other nations fare does not matter in a particular nation’s rating score. This is very different from a comparative rating. An example of comparative rating is the percentile score—the way GRE results are at times given. If a student is described as belonging to the 99th percentile, it clearly says something about this student’s performance vis-à-vis other students.
It is arguable that even for sovereign credit ratings there is a case for providing some kind of a comparative score. When an investor searches across nations for a place to put her money, the relative rating of nations is important. If nation i’s rating remaining the same, other nations’ ratings improve over time, there may well be a case to invest less in nation i.
Over the last five years, the global economy has gone through lots of highs and lows. Nations have moved up and down the ratings ladder. This makes it entirely possible that a particular nation that has had no rating change may now be better off or worse off in comparative terms. Also, a nation that has travelled down the rating ladder in absolute terms may be, in relative terms, better off because others have done even worse. Since, for investors, relative or comparative rating is such an important concept, it was felt that the Ministry of Finance ought to develop a new index which captures precisely this idea. Accordingly, the new index that has been developed is called the “Comparative Rating Index for Sovereigns” (CRIS). The detailed derivation of CRIS is available in the full paper on which this summary is based. The full paper is currently classified.
The computation of CRIS is based on nothing apart from Moody’s ratings and data on the GDPs of different nations as given by the IMF. In the paper we define CRIS formally and then track how nations have done over time. In order to capture this impact, the Ministry of Finance developed a new system for comparing the relative ratings of sovereign debt based on the historical evolution of their ratings over five years and the volume of their economic activity as measured by their GDP (not adjusted for Purchasing Power Parity (PPP)). The Finance Ministry develops a relative rating index and rank 101 economies according to this for the years 2007 to 2011. The index uses external data on GDP and ratings combined in terms of pure mathematical and statistical methods without interventions or interpretations.
The Moody’s ratings that the Ministry has used for all countries are the long term foreign currency sovereign ratings. To clarify, the Moody’s rating by this measure for India in 2007 and 2011 was the same (Baa 3). The CRIS score for these years for India were 66.47 (2007) and 69.83 (2011).
In other words, in relative terms India has become a better investment destination by 5.06%. In addition, India’s rank in terms of CRIS has moved up from 61st to 55th. If we view the rankings in terms of quintiles (blocks of one-fifth of the distribution) India moves from the fourth quintile to the third, that is, the middle quintile.
As expected the CRIS score for Greece has dropped sharply from 74.24 in 2007 to 13.97 in 2011—a decline of 81%; and that of Ireland and Portugal have dropped by more than 14%. Interestingly, in terms of CRIS, the U.S. has seen its score rise from 78.20 to 81.81. Ironically, this is accompanied by a loss of rank from the top of the chart to the 16th position. This shows that CRIS is distinct from a percentile score which is also a relative measure of status. In 2007 the 1st rank was shared between 20 economies but by 2011 this cohort had shrunk to 15.
The improvement in CRIS scores of nations such as India, China and Indonesia are partly due to the dramatic falls of scores of some European nations leading to a deterioration of the world average by over 4.8%.
This was especially evident in the cases of Greece, Ireland, Italy, Portugal and Spain. Dramatic falls of this type across the 2007 to 2011 period include Portugal’s fall from 23rd to 74th position with an index erosion of almost 15%, Ireland’s descent from the 1st rank club to 70th position with an over 14% fall in its index value and Greece’s precipitous dive from 30th rank to 101st (last) position accompanied by an over 81% fall in index value across the same period. Italy descended from 23rd to 37th rank with an index value loss of around 0.5%.Spain moved down from 1st to 34th rank and its index value lost approximately 1.35%. Iceland also suffered a great fall from 1st rank to 61st with an index fall of about 11.5%.
Other interesting developments include China’s index value increase of about 7.3% across the 2007 to 2011 time span. Brazil’s index value increased by 11.8%, Russia’s by about 7.5% and South Africa’s by about 5.79% in the same period. All the BRICS had improvements in rank as well as index value.
Among other economies, Israel increased in terms of CRIS value from 73.01 in 2007 to 77.58 in 2011 and Saudi Arabia had a CRIS value jump from 74.24 to 78.82 across the same period. Botswana’s CRIS value increased from 73.01 to 76.25 across the 2007 to 2011 interval.
The ten highest increases in the CRIS from 2007 to 2011 were achieved by (1) Paraguay (31.26%), (2) Lebanon (22.71%), (3) Bolivia (21.2%), (4) Uruguay (18.09%), (5) Belize and Nicaragua (both 15.63%), (7) Philippines (14.26%), (8) Indonesia (12.83%), (9) Peru (12.75%) and (10) Ecuador (12.27%). In interpreting these results, it needs to be borne in mind that for countries which began with low CRIS values, the scope for improvement is more. Seventeen economies had negative growth in the CRIS across this period. The ten highest decreases were (1) Greece (-81.19%), (2) Portugal (-14.82%), (3) Ireland (-14.14%), (4) Iceland (-11.52%), (5) Belarus (-10.05%), (6) Jamaica (-7.45%), (7) Egypt (-7.16%), (8) Cyprus (-5.94%), (9) Pakistan (-5.83%) and (10) Hungary (-4.66%).
Bethel Finance news:
Major credit rating agencies give out the sovereign credit rating of each nation as an absolute grade. How other nations fare does not matter in a particular nation’s rating score. This is very different from a comparative rating. An example of comparative rating is the percentile score—the way GRE results are at times given. If a student is described as belonging to the 99th percentile, it clearly says something about this student’s performance vis-à-vis other students.
It is arguable that even for sovereign credit ratings there is a case for providing some kind of a comparative score. When an investor searches across nations for a place to put her money, the relative rating of nations is important. If nation i’s rating remaining the same, other nations’ ratings improve over time, there may well be a case to invest less in nation i.
Over the last five years, the global economy has gone through lots of highs and lows. Nations have moved up and down the ratings ladder. This makes it entirely possible that a particular nation that has had no rating change may now be better off or worse off in comparative terms. Also, a nation that has travelled down the rating ladder in absolute terms may be, in relative terms, better off because others have done even worse. Since, for investors, relative or comparative rating is such an important concept, it was felt that the Ministry of Finance ought to develop a new index which captures precisely this idea. Accordingly, the new index that has been developed is called the “Comparative Rating Index for Sovereigns” (CRIS). The detailed derivation of CRIS is available in the full paper on which this summary is based. The full paper is currently classified.
The computation of CRIS is based on nothing apart from Moody’s ratings and data on the GDPs of different nations as given by the IMF. In the paper we define CRIS formally and then track how nations have done over time. In order to capture this impact, the Ministry of Finance developed a new system for comparing the relative ratings of sovereign debt based on the historical evolution of their ratings over five years and the volume of their economic activity as measured by their GDP (not adjusted for Purchasing Power Parity (PPP)). The Finance Ministry develops a relative rating index and rank 101 economies according to this for the years 2007 to 2011. The index uses external data on GDP and ratings combined in terms of pure mathematical and statistical methods without interventions or interpretations.
The Moody’s ratings that the Ministry has used for all countries are the long term foreign currency sovereign ratings. To clarify, the Moody’s rating by this measure for India in 2007 and 2011 was the same (Baa 3). The CRIS score for these years for India were 66.47 (2007) and 69.83 (2011).
In other words, in relative terms India has become a better investment destination by 5.06%. In addition, India’s rank in terms of CRIS has moved up from 61st to 55th. If we view the rankings in terms of quintiles (blocks of one-fifth of the distribution) India moves from the fourth quintile to the third, that is, the middle quintile.
As expected the CRIS score for Greece has dropped sharply from 74.24 in 2007 to 13.97 in 2011—a decline of 81%; and that of Ireland and Portugal have dropped by more than 14%. Interestingly, in terms of CRIS, the U.S. has seen its score rise from 78.20 to 81.81. Ironically, this is accompanied by a loss of rank from the top of the chart to the 16th position. This shows that CRIS is distinct from a percentile score which is also a relative measure of status. In 2007 the 1st rank was shared between 20 economies but by 2011 this cohort had shrunk to 15.
The improvement in CRIS scores of nations such as India, China and Indonesia are partly due to the dramatic falls of scores of some European nations leading to a deterioration of the world average by over 4.8%.
This was especially evident in the cases of Greece, Ireland, Italy, Portugal and Spain. Dramatic falls of this type across the 2007 to 2011 period include Portugal’s fall from 23rd to 74th position with an index erosion of almost 15%, Ireland’s descent from the 1st rank club to 70th position with an over 14% fall in its index value and Greece’s precipitous dive from 30th rank to 101st (last) position accompanied by an over 81% fall in index value across the same period. Italy descended from 23rd to 37th rank with an index value loss of around 0.5%.Spain moved down from 1st to 34th rank and its index value lost approximately 1.35%. Iceland also suffered a great fall from 1st rank to 61st with an index fall of about 11.5%.
Other interesting developments include China’s index value increase of about 7.3% across the 2007 to 2011 time span. Brazil’s index value increased by 11.8%, Russia’s by about 7.5% and South Africa’s by about 5.79% in the same period. All the BRICS had improvements in rank as well as index value.
Among other economies, Israel increased in terms of CRIS value from 73.01 in 2007 to 77.58 in 2011 and Saudi Arabia had a CRIS value jump from 74.24 to 78.82 across the same period. Botswana’s CRIS value increased from 73.01 to 76.25 across the 2007 to 2011 interval.
The ten highest increases in the CRIS from 2007 to 2011 were achieved by (1) Paraguay (31.26%), (2) Lebanon (22.71%), (3) Bolivia (21.2%), (4) Uruguay (18.09%), (5) Belize and Nicaragua (both 15.63%), (7) Philippines (14.26%), (8) Indonesia (12.83%), (9) Peru (12.75%) and (10) Ecuador (12.27%). In interpreting these results, it needs to be borne in mind that for countries which began with low CRIS values, the scope for improvement is more. Seventeen economies had negative growth in the CRIS across this period. The ten highest decreases were (1) Greece (-81.19%), (2) Portugal (-14.82%), (3) Ireland (-14.14%), (4) Iceland (-11.52%), (5) Belarus (-10.05%), (6) Jamaica (-7.45%), (7) Egypt (-7.16%), (8) Cyprus (-5.94%), (9) Pakistan (-5.83%) and (10) Hungary (-4.66%).
Bethel Finance: Israel has ‘no better friend in the world than Canada,’ John Baird says
www.bethelfinance.com
Foreign Affairs Minister John Baird kicked off his first full day in Israel by attending the opening of a new Holocaust education facility in Jerusalem.
Baird says the new seminars wing of the International School for Holocaust Education at Yad Vashem will play a key role in ensuring humanity doesn’t forget the lessons of genocide.
And he says Israel has no better friend in the world than Canada.
Baird and Finance Minister Jim Flaherty will spend the next several days visiting Israel and the Palestinian territories.
The campus holds seminars each year for educators from 55 countries around the world and Israel, and develops country-specific and custom-made tools for different age groups in more than 20 languages.
Jewish philanthropist Joseph Gottdenker, himself a Holocaust survivor, says Yad Vashem gives a voice and a name to each person who perished, “and restores to them the dignity of living history.”
“Holocaust education enables us to remember the lessons of the past and provides guidance to a more tolerant, hopeful and brighter future,” Gottdenker said.
In 2011, the school hosted 67 seminars for educators and lay leaders around the world, twice the numbers held in recent years.
Baird, a black skull cap perched on his head, emphasized the importance of Yad Vashem and its new 4,100-square-metre facility in documenting and teaching the lessons of the Holocaust.
“There is no better friend to Israel than Canada,”Baird said. “We shall always be there for you, and in front of you.”
Foreign Affairs Minister John Baird kicked off his first full day in Israel by attending the opening of a new Holocaust education facility in Jerusalem.
Baird says the new seminars wing of the International School for Holocaust Education at Yad Vashem will play a key role in ensuring humanity doesn’t forget the lessons of genocide.
And he says Israel has no better friend in the world than Canada.
Baird and Finance Minister Jim Flaherty will spend the next several days visiting Israel and the Palestinian territories.
The campus holds seminars each year for educators from 55 countries around the world and Israel, and develops country-specific and custom-made tools for different age groups in more than 20 languages.
Jewish philanthropist Joseph Gottdenker, himself a Holocaust survivor, says Yad Vashem gives a voice and a name to each person who perished, “and restores to them the dignity of living history.”
“Holocaust education enables us to remember the lessons of the past and provides guidance to a more tolerant, hopeful and brighter future,” Gottdenker said.
In 2011, the school hosted 67 seminars for educators and lay leaders around the world, twice the numbers held in recent years.
Baird, a black skull cap perched on his head, emphasized the importance of Yad Vashem and its new 4,100-square-metre facility in documenting and teaching the lessons of the Holocaust.
“There is no better friend to Israel than Canada,”Baird said. “We shall always be there for you, and in front of you.”
Bethel Finance:Financial institutions double management fees
www.bethelfinance.com
Every product has its price, and management fees are the price we pay for our pension savings. For the past two and half years, long before it was fashionable, "Globes" has declared that management fees charged by Israeli financial institutions are too high, that the fees soared after the Bachar capital market reform, and that the regulator should take effective measures to deal with the problem.
The Capital Markets, Savings, and Pension Supervision Department at the Ministry of Finance has said in response that this was a "free market", and that there was no need to intervene, asserting, "Competition will bring management fees to equilibrium."
For their part, finance institutions claim that high management fees are the price to be paid for receiving quality investment management.
"Globes" has examined the product the public receives for these too high management fees - the return on investments in pension savings and provident funds. The answer is NIS 11.4 billion paid in management fees in 2007-11 to provident fund managers, investment houses, and insurance companies, while the average return on provident funds over the same period is - zero. The precise figure is 0.06%.
The average nominal return on provident funds in 2007-11 was 4.09%. When inflation over this period is deducted, savers are left with no return at all on their investment. The same is true for pension savings and managers insurance policies.
One of the pleasant features of management fees is that investment institutions collect them every month, rain or shine, irrespective of the investment's performance. Has any fund manager has ever considered cutting management fees because of poor performance, or has a CEO ever made a one-time reduction because of the dismal results provided by the product. Don’t make us laugh.
There are two kinds of provident funds: sector funds, which have low management fees (averaging 0.28% a year in 2007-11); and funds available for the general public, which account for 75% of provident funds' aggregate assets under management. These latter provident funds charged an average management fee of 1.04% a year in 2007-11 - 3.4 times the fee charged for sector funds. Worse, the publicly available provident funds had a return of 3.92% over this period, with the result that the real return was minus 0.32% a year, for a loss of 1.6% of the public's money invested in them.
Since the Bachar reforms forced the banks to divest their provident funds to investment institutions, the latter have collected NIS 3.3 billion in management fees from the public. Since the transfer, the average management fee rose from 0.64% to 1.11%, and anyone who imagines that a tenth of a percent is negligible should do the math - each tenth of a percent in management fees amounts to NIS 250 million. Furthermore, every shekel channeled to management fees is lost to the future accumulation and loss of compound interest payments. This means that NIS 3.3 billion in extra management fees means a loss of NIS 7 billion in future pension disbursements.
Had the higher management fees been accompanied by higher returns, compliance with tougher regulations, or improved service, there would be no grounds for complaint. But that is not the case. Nearly all the extra billions of shekels in managements fees were pocketed by a tiny group of capital market executives, who enriched themselves profligately, and to a few hundred middle managers at investment houses, whose salaries soared to make them among the top 10% of income-earners. The money was spent on opulent offices, customized jeeps, marketers, commissions, gifts, foreign travel for insurance agents, and wasteful conferences.
Management fees rose by up to 76% since provident funds were sold to investment houses. The eight biggest investment institutions bought the ten biggest provident funds from the banks. Without exception, they have raised their management fees since 2006. The fees peaked in 2008-09, before subsequently edging down by negligible amounts. Some investment institutions raised the managements all at once, others gradually; but they raised the fees.
For example, the Shefa Provident Fund, which was already expensive when it was owned by First International Bank of Israel (TASE: FTIN), with a management fee of 0.91%, now has a fee of 1.75% under its new owner Yashir Investment House. When Yashir merged with Meitav Investment House Ltd., the management fee was lowered to 1.6% - 76% more than when the provident fund was owned by the bank.
The Ministry of Finance is trying to conceal the facts as much as possible, by not mentioning the data on its provident funds comparisons site, Gemelnet. As provident funds are merged - at the order of the ministry, dozens of funds have been consolidated, with hundreds more to follow - the funds' pre-merger figures vanish, never to be retrieved again. Consequently, there is no way of knowing previous management fee, with the result that savers cannot now whether his or her savings deteriorated following a merger. This ignorance is apparently convenient for the Capital Markets, Savings and Pensions Supervision Department.
Excellence funds are the most expensive
The average management fee for public provident funds peaked at 1.11% in 2009, before dipping to 1.07% in 2010 and 1.02% in 2011. However, the increase in assets under management meant that annual revenue from fees was unchanged at NIS 2.5 billion in both 2009 and 2010.
Provident funds owned by Excellence Investments Ltd. (TASE: EXCE) charged the highest management fees in 2010 and 2011 - 1.2%, down from their peak of 1.29%. Put another way, management fees are good and high management fees are great.
In second place is Excellence's parent company The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), controlled by Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG). Phoenix's average management fee is 1.15%. Infinity Investment House Ltd. shares second place.
They are followed by Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and DS Apex Holdings Ltd. (TASE:DSAP) (1.11%), Altshuler Shaham Ltd. (1.10%); Meitav and Tamir Fishman & Co. (1.09%).
Psagot Investment House Ltd., the largest provident fund manager, charged management fees of 1.06% in 2011, down from 1.10% in 2010.
The investment houses with below average management fees are Analyst IMS Investment Management Services Ltd. (TASE:ANLT) (0.99%); Halman Aldubi Investment House Ltd. (0.98%); Hadas Arazim Investment House Ltd. (0.96%); Ayalon Holding Ltd. (TASE: AYAL) (0.95%); Menorah Mivtachim Holdings Ltd. (TASE: MORA) (0.92%, excluding return-guaranteed funds); and Epsilon Investment House Ltd. (0.91%, excluding Mayan Provident Fund).
It should be noted that Analyst, which never bought a bank provident fund, slashed its management fee from 1.45% in 2007 to 0.99% in 2011.
The lowest management fees are charged by Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and Yelin Lapidot Investment House Ltd., at 0.9%, and IBI Investment House Ltd. (TASE:IBI), at 0.86%.
Yelin Lapidot's provident funds had the highest returns in the past few years, giving investors the best return on their money.
Every product has its price, and management fees are the price we pay for our pension savings. For the past two and half years, long before it was fashionable, "Globes" has declared that management fees charged by Israeli financial institutions are too high, that the fees soared after the Bachar capital market reform, and that the regulator should take effective measures to deal with the problem.
The Capital Markets, Savings, and Pension Supervision Department at the Ministry of Finance has said in response that this was a "free market", and that there was no need to intervene, asserting, "Competition will bring management fees to equilibrium."
For their part, finance institutions claim that high management fees are the price to be paid for receiving quality investment management.
"Globes" has examined the product the public receives for these too high management fees - the return on investments in pension savings and provident funds. The answer is NIS 11.4 billion paid in management fees in 2007-11 to provident fund managers, investment houses, and insurance companies, while the average return on provident funds over the same period is - zero. The precise figure is 0.06%.
The average nominal return on provident funds in 2007-11 was 4.09%. When inflation over this period is deducted, savers are left with no return at all on their investment. The same is true for pension savings and managers insurance policies.
One of the pleasant features of management fees is that investment institutions collect them every month, rain or shine, irrespective of the investment's performance. Has any fund manager has ever considered cutting management fees because of poor performance, or has a CEO ever made a one-time reduction because of the dismal results provided by the product. Don’t make us laugh.
There are two kinds of provident funds: sector funds, which have low management fees (averaging 0.28% a year in 2007-11); and funds available for the general public, which account for 75% of provident funds' aggregate assets under management. These latter provident funds charged an average management fee of 1.04% a year in 2007-11 - 3.4 times the fee charged for sector funds. Worse, the publicly available provident funds had a return of 3.92% over this period, with the result that the real return was minus 0.32% a year, for a loss of 1.6% of the public's money invested in them.
Since the Bachar reforms forced the banks to divest their provident funds to investment institutions, the latter have collected NIS 3.3 billion in management fees from the public. Since the transfer, the average management fee rose from 0.64% to 1.11%, and anyone who imagines that a tenth of a percent is negligible should do the math - each tenth of a percent in management fees amounts to NIS 250 million. Furthermore, every shekel channeled to management fees is lost to the future accumulation and loss of compound interest payments. This means that NIS 3.3 billion in extra management fees means a loss of NIS 7 billion in future pension disbursements.
Had the higher management fees been accompanied by higher returns, compliance with tougher regulations, or improved service, there would be no grounds for complaint. But that is not the case. Nearly all the extra billions of shekels in managements fees were pocketed by a tiny group of capital market executives, who enriched themselves profligately, and to a few hundred middle managers at investment houses, whose salaries soared to make them among the top 10% of income-earners. The money was spent on opulent offices, customized jeeps, marketers, commissions, gifts, foreign travel for insurance agents, and wasteful conferences.
Management fees rose by up to 76% since provident funds were sold to investment houses. The eight biggest investment institutions bought the ten biggest provident funds from the banks. Without exception, they have raised their management fees since 2006. The fees peaked in 2008-09, before subsequently edging down by negligible amounts. Some investment institutions raised the managements all at once, others gradually; but they raised the fees.
For example, the Shefa Provident Fund, which was already expensive when it was owned by First International Bank of Israel (TASE: FTIN), with a management fee of 0.91%, now has a fee of 1.75% under its new owner Yashir Investment House. When Yashir merged with Meitav Investment House Ltd., the management fee was lowered to 1.6% - 76% more than when the provident fund was owned by the bank.
The Ministry of Finance is trying to conceal the facts as much as possible, by not mentioning the data on its provident funds comparisons site, Gemelnet. As provident funds are merged - at the order of the ministry, dozens of funds have been consolidated, with hundreds more to follow - the funds' pre-merger figures vanish, never to be retrieved again. Consequently, there is no way of knowing previous management fee, with the result that savers cannot now whether his or her savings deteriorated following a merger. This ignorance is apparently convenient for the Capital Markets, Savings and Pensions Supervision Department.
Excellence funds are the most expensive
The average management fee for public provident funds peaked at 1.11% in 2009, before dipping to 1.07% in 2010 and 1.02% in 2011. However, the increase in assets under management meant that annual revenue from fees was unchanged at NIS 2.5 billion in both 2009 and 2010.
Provident funds owned by Excellence Investments Ltd. (TASE: EXCE) charged the highest management fees in 2010 and 2011 - 1.2%, down from their peak of 1.29%. Put another way, management fees are good and high management fees are great.
In second place is Excellence's parent company The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), controlled by Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG). Phoenix's average management fee is 1.15%. Infinity Investment House Ltd. shares second place.
They are followed by Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and DS Apex Holdings Ltd. (TASE:DSAP) (1.11%), Altshuler Shaham Ltd. (1.10%); Meitav and Tamir Fishman & Co. (1.09%).
Psagot Investment House Ltd., the largest provident fund manager, charged management fees of 1.06% in 2011, down from 1.10% in 2010.
The investment houses with below average management fees are Analyst IMS Investment Management Services Ltd. (TASE:ANLT) (0.99%); Halman Aldubi Investment House Ltd. (0.98%); Hadas Arazim Investment House Ltd. (0.96%); Ayalon Holding Ltd. (TASE: AYAL) (0.95%); Menorah Mivtachim Holdings Ltd. (TASE: MORA) (0.92%, excluding return-guaranteed funds); and Epsilon Investment House Ltd. (0.91%, excluding Mayan Provident Fund).
It should be noted that Analyst, which never bought a bank provident fund, slashed its management fee from 1.45% in 2007 to 0.99% in 2011.
The lowest management fees are charged by Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and Yelin Lapidot Investment House Ltd., at 0.9%, and IBI Investment House Ltd. (TASE:IBI), at 0.86%.
Yelin Lapidot's provident funds had the highest returns in the past few years, giving investors the best return on their money.
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