Capital Market Authority Seeks Tighter Oversight of Alternative Investments
Israel's Capital Market Authority plans to tighten oversight on over 305 billion shekels in alternative investments, proposing quarterly valuations to protect public savings from valuation gaps and market volatility.
The Capital Market Authority is seeking to tighten oversight of alternative investments acquired by institutional bodies for the public's pension funds and provident funds. Currently, regulations require management bodies to conduct valuations of these illiquid investments at least once a year. The volume of these assets has already surpassed 305 billion shekels. However, the value of these assets can change significantly along the way, in a manner that remains opaque to regulators and savers.
In the context of institutional bodies, this means there is a gap in the public's savings portfolios between the actual real-world asset value and the value seen by savers. A market source explained that "there is a fairness issue concerning various savers. A saver can move between provident funds or tracks and benefit from outdated valuations of alternative assets. The problem is that when transaction pricing relies on outdated values, a transfer of value can occur among members." For example, following a drop not yet recognized in valuation, an exiting member receives too much at the expense of those remaining.
Adapting Regulation to Market Reality
Consequently, Asaf Nachmani, senior deputy to the Capital Market Authority commissioner and head of the investment division, stated this week that "in the near future, we as regulators will also try to adapt regulation to changes in activity volumes and complexity." Nachmani explained that private equity fund valuations are sometimes received with a three-month delay, whereas severe market volatility forces institutions to occasionally liquidate investments to generate liquidity, which is reflected with a significant lag.
"Today, regulations require valuing investment funds once a year. There is no doubt that we as regulators need to fix this and adapt to the reality on the ground," Nachmani said at the annual conference of the Arnon Segev law firm and global investment firm Pantheon. The authority is interested in increasing the mandatory frequency of valuations to at least once a quarter.
More Valuations Mean Higher Costs
According to market sources, a significant portion of companies actually value their assets more frequently than once a year, but not all institutions handle it uniformly regarding testing, legal, and accounting reviews when investing in alternative assets. The regulator wants all savings bodies to adapt to faster updates. For institutions, the reason for settling for less frequent valuations is cost savings; more valuations mean higher expenses.
Yet while these assets were once a marginal slice of institutional portfolios, they now represent a vast amount of public money managed in the alternative asset market. This market includes private equity funds, non-tradable bonds, real estate, and technology, with institutions investing in external bodies and paying them management fees.
According to data provided by Nachmani, the volume of funds in this sector stands at 305 billion shekels, accounting for about 8.5% of all long-term savings money in Israel, including pensions, provident funds, and advanced training funds. This amount has surged compared to 95 billion shekels at the end of 2019. "Investment funds are no longer an alternative or niche asset; they have become part of the mainstream," he argued.
A Regulatory Blind Spot
According to Nachmani, there is a wide gap between the growth of institutional investments in this field and regulation that has lagged behind, which must be updated. "Regulation regarding investment funds has not evolved over the years. This is a supervisory blind spot. Even as a commissioner, when looking at monthly or quarterly reports today, I cannot deeply assess what is happening in that segment of fund investments."
Accordingly, he signaled the direction of expected new regulatory demands, warning institutions that before making an investment, "if you are investing in an investment fund that cannot provide you with at least quarterly valuations and updates throughout the life of the investment, it is worth reconsidering whether to invest."
Attorney Arnon Segev explained that rapid growth is also visible in the market for continuation vehicles—new funds into which existing investments are rolled over at the end of the original fund's operational period. According to Pantheon data, total fundraising in private markets has dropped by about 20% from its peak, reaching approximately 1.74 trillion dollars in 2025.
