Tel Aviv Stock Exchange TASE 311 (R).
(photo credit: Gil Cohen Magen / Reuters)
An exchange-traded fund (ETF) focusing on Israeli assets launched in New York on
Wednesday, hoping to compete with the MSCI Israel Index Fund as a better
benchmark for the Israeli economy.
Unlike the five-year-old MSCI Israel
Index Fund (EIS), the new Market Vectors ISRA Fund relies on an index of Israeli
equities listed not just in Tel Aviv but also in the London, New York and Warsaw
stock exchanges. ISRA relies on an index called BIGI from BlueStar, a
research-focused financial firm specializing in Israeli capital
“The importance of having an ETF based on BIGI in the US market
is that all types of investors – large institutions like the Miami Federation’s
Endowment Fund and small individual investors – can equally access ISRA, and we
have seen demand from both types of investors,” said BlueStar’s Steven
Schoenfeld. Other indexes are “less efficient” in tracking the Israeli economy,
To be included in the fund, a company can either be founded,
domiciled or managed in Israel, or hold significant research and development
facilities in the country. If Israeli companies such as Mellanox, for example,
delist from the Tel Aviv Stock Exchange, they can still keep their place in the
BlueStar’s approach means companies like Perrigo Company and
LivePerson Inc., which are not originally Israeli but are listed in Tel Aviv,
can also be included. The same applies to VeriFone Holdings Inc., which delisted
its shares from Tel Aviv several years ago but still has development activity in
Israel as a result of the acquisition of Lipman.
Delek US Holdings Inc.
and Alon USA Energy Inc., Israeli fuel refining and marketing companies active
in the US, are also in the index.
“Many people don’t know that these are
Israeli companies, and when we talk to them about investment in Israel, we
mention to them that these companies generate employment in the US,” Schoenfeld
The weighting of each company on the index is set according to its
market cap, with the quantity of floating shares in the hands of the public also
being taken into account. The investment committee, manned by people with
experience of running ETFs, among them the person behind the compilation of the
MSCI indices, examines the composition of the index every six months.
company with the highest weighting on the index is Teva Pharmaceutical
Industries Ltd., with 12.75 percent, the maximum weighting allowed. In the
distribution among sectors, computing and technology stand out, amounting to 30%
of the total. Pharmaceuticals represents 26% of the index, while the financial
sector, composed of banks and insurance companies, represents
“Israel is uniquely positioned to offer investors emerging-market
growth characteristics with a developedmarket approach to economic management,”
said Amrita Bagaria, the ETF product manager with Market Vectors.
country has a vibrant economy with broad sector representation. With that in
mind, we have selected an index for ISRA that best represents the Israeli market
and captures the full spectrum of economic growth potential.”