Knesset to Vote on Law Ensuring Stability for Hedge Funds in Trust
The hedge fund in trust sector, managing approximately 6 billion shekels, faces regulatory uncertainty as its temporary authorization expires. The Knesset is set to vote on a permanent legal framework today, while the proposed metropolitan transport authorities reform remains stalled.
Following approval by the consensus committee, the Knesset is expected to vote today (Tuesday) on a law that will allow for continued investment in hedge funds in trust.
The hedge fund in trust sector, which launched in April 2023 and already manages about 6 billion shekels, currently operates under the second and final extension of a temporary order. Without legislation, there would soon be a risk to the launch of new funds and perhaps even to existing ones. Last October, Globes exposed the legal crisis that hedge funds in trust had fallen into, which is now expected to be resolved.
Following the approval of the law in the Knesset, the Israel Securities Authority is expected to publish a draft of a permanent instruction for hedge funds in trust, which will replace the temporary order, as well as a proposal for sub-classification of hedge funds. The amendment to the law is expected to allow mutual fund managers in the future to offer additional types of mutual funds in the format of private investment funds.
There are currently 46 hedge funds in trust operating on the stock exchange, whose establishment was based on the traditional hedge fund model — a sophisticated and expensive investment product used by qualified investors with liquid capital of more than 10 million shekels and institutional bodies seeking to hedge risks in the capital market.
Since their launch about three years ago, hedge funds in trust have become a hit among existing investors. As mentioned, their asset volume currently stands at about 6 billion shekels, having doubled within a year.
However, not everyone supports the law. In the past, officials at the Bank of Israel opposed hedge funds in trust, expressing concern that the very rapid growth of the young sector could lead to a liquidity crisis in the future if the public tries to withdraw its money from the funds all at once.
At the beginning of the month, the Finance Committee approved the bill for a second and third reading, but before the Knesset was dissolved, the law was not brought to a vote in the plenum. From the moment the Knesset was dissolved and an election period was declared, legislation in the Knesset requires the approval of the consensus committee, composed of Coalition Chairman MK Ofir Katz and Opposition Coordinator MK Merav Ben Ari. The two reached an agreement regarding the law, which, as mentioned, is expected to be brought to a vote in the plenum.
Metropolitan Authorities Law Stalled
However, another important economic law is missing from the Knesset's agenda: the establishment of metropolitan authorities. This involves a deep structural change in the transport sector through the creation of metropolitan authorities in Gush Dan, Jerusalem, and Haifa. These authorities will receive powers previously held by the Ministry of Transport, in a centralized structure different from that practiced in OECD countries.
In a letter sent this month by Deputy Budget Commissioner Eli Bing and Ministry of Transport Director General Moshe Ben Zaken to Coalition Chairman Ofir Katz, the two called for the law to be passed. They defined the move as "the most significant reform in the field of public transport in decades."
Bing and Ben Zaken emphasized that the cost of traffic congestion is estimated at about 40 billion shekels per year, and that the main solution to the problem is improving public transport and shifting away from travel in private vehicles.
According to them, "the establishment of the authorities will significantly improve the lives of citizens who will travel on reliable, fast, and efficient public transport. After the establishment of a metropolitan authority in London, the rate of passenger growth doubled and the waiting time for bus lines at the station decreased by 60%."
The urgency to promote the reform was born following unprecedented agreements. Since the 90s, public committees have recommended promoting the law, but it was not implemented due to historical opposition from the Ministry of Transport to decentralizing powers to local authorities. In the current term under Minister Miri Regev, the ministry's position has changed, as the reform may remove political pressure from the ministry and allow for joint planning.
However, against the backdrop of coalition tensions, the law was not brought for discussion in the consensus committee. It is estimated that this was done following a veto imposed by the ultra-Orthodox factions on its promotion, even though it was agreed that the metropolitan authorities would not be able to change the status quo regarding public transport on Shabbat.
