Investment houses are starting to take an interest in finding investment instruments that comply with Halacha, in an effort to target and serve haredi investors and seek new niche markets.
“For some time we have viewed the haredi public as an important investor and a sector that has been underserved because of its investment limitations,” Excellence Nessuah Mutual Funds CEO Meir Mazoz told The Jerusalem Post in a recent interview. “Like every household, haredi families also are saving their money to help and take care of their children in the future, whether for the purpose of weddings or buying an apartment.”
“It’s a stigma that the haredi public is poor and does not have the tools to participate in the free market,” he said. “Today, a great part of the religious population is involved in the business sector, whether working in the hi-tech sector, as insurance brokers, architects, lawyers, or business owners. There is a lot of money floating around that is seeking kosher investment opportunities.”
Excellence Nessuah’s kosher funds are a small but fast-growing niche within asset management, Mazoz said, and they invest only in financial products that conform with Halacha. The recent emergence of kosher funds is due to a number of factors, he said, including the global financial crisis, which also brought about a currency crisis.
“Until two years ago, most of the haredi community put their money savings into dollar investments because of the limitations of investment avenues that conform with Halacha,” Mazoz said. “But due to the global financial crisis and large depreciations of exchange rates, a lot of people lost a lot of money and are looking for alternative channels. We saw a need and the potential from the haredi sector to operate kosher funds.”
Over the past two years, the Badatz, which issues haredi kashrut certification, has begun granting its approval to various investment instruments.
Excellence Nessuah, which manages about NIS 50 billion, has received Badatz certification for five of its mutual funds that invest according to Halacha, Mazoz said. It prides itself for being one of the first investment houses to receive approval from the Badatz, he said.
Other investments firm that have received rabbinical approval for their financial investments include Hadas Malchus and Hilat Shoham.
Over the next six months, Excellence Nessuah will be conducting an extensive marketing campaign to target the haredi community and increase its market share in the sector, Mazoz said.
“Over the past six months we have been getting more and more requests from Mercantile Bank and Mizrahi-Tefahot Bank seeking investments for their haredi customers into our kosher funds,” he said. “We aren’t seeing dramatic volumes, but the haredi sector is hungry to hear about the investment tools and avenues available, and there is a lot of work to be done in educating this sector to the financial world available to them.”
Until recently, observant Jews had a problem investing their money in standard financial instruments because most of them are prohibited according to Halacha. For example, investments in corporate bonds can be problematic unless the company meets certain conditions because it is forbidden to charge interest on loans.
Buying the shares of companies that sell nonkosher food or don’t observe Shabbat is also a problem. By owing shares of such companies, the haredi investor becomes a part owner of the company and an accomplice to violating Halacha.
Excellence Nessuah has found a convenient way around the prohibitions by offering kosher funds that invest solely in indexes or government bonds, thereby buying the movement of the shares without having any ownership in the companies represented on the indexes, Mazoz said.
Although stock and bond indexes such as the Tel Aviv-25, the TA-100 or the TelBond include companies that might violate Halacha, he said, kosher funds allow haredim to invest without actually owning part of the company, so there isn’t a halachic problem.
“Our funds, which have Badatz certification, are very solid funds with
a relatively low risk-level, which during the height of the global
financial crisis in 2008 performed relatively well compared with
nonkosher funds as the markets were tumbling,” Mazoz said.
According to data published by Excellence Nessuah, its kosher funds
generated a return of between 14 percent and 15% in 2008. While most
Israeli funds fell in 2009, Excellence Nessuah’s kosher funds continued
to rise, driven by a fast recovery in the local economy, and since the
beginning of this year the funds have yielded 3% to 4%, the company
said.
In a press conference that took place earlier this week and was
attended by the religious media, the Badatz urged the haredi public to
refrain from making direct investments in companies that don’t observe
Shabbat. Badatz representatives said it was a big problem to buy shares
of companies such IDB Holdings, which has subsidiaries and holdings in
various companies, making it difficult to be sure about all its
activities. The Badatz said direct investments in stocks were
problematic because of potential halachic pitfalls.