In an effort to boost investment abroad, Yadin Antebi, commissioner of capital markets, has drafted a set of proposals for new rules for asset managers, warning that the rate of foreign investment by institutional bodies in Israel was still lagging behind global standards - a situation which could poise a risk to domestic public savings.
"The high level of dependence by institutional investors on the Israeli capital market could, in extreme cases, lead to a crisis in the pension savings market and could harm the Israeli public," Antebi warned in a statement paper released by the Finance Ministry and sent to institutional investors for comment.
Antebi added that the liberalization processes of the domestic markets, tax reforms regarding investment of funds abroad and other changes to investment rules all were supposed to support and encourage institutional bodies but failed to achieve the desired result.
Under the proposed changes aimed at boosting investment abroad, domestic pension and provident funds would be permitted to charge investors for management fees paid to foreign funds.
Israelis have stepped up investment abroad since the government equalized capital gains taxes on domestic and most foreign investments last year, with funds investing in stocks abroad raising a net NIS 6.2 billion in the first four months of 2006.
But according to Antebi's paper, Israeli institutional investors have placed only 7.5 percent of the assets they manage abroad, compared with the rate of 11.1% in the US and 26.5% for their European counterparts.
In the paper, the ministry is also proposing regulations that would bind investment committees and risk managers to regularly review geographic risk levels.
Bloomberg contributed to this report.