The Product That Brought Wall Street 'Gorillas' to Israel Has Lost About 70% of Assets
The collaboration between Israeli insurance companies and global asset management giants like BlackRock, Fidelity, and State Street has faced headwinds. Assets in these savings policies have dropped from a peak of 4 billion shekels to less than 1.2 billion.
The collaboration between Israeli insurance companies and global asset management giants seemed like a great promise two years ago: savers would get access to investment management by BlackRock, Fidelity, and State Street, and insurance companies would enjoy higher management fees. However, a combination of a weakening dollar, disappointing returns, and the strengthening of the Israeli capital market has reversed the trend. A Calcalist check reveals that The Phoenix, Harel Insurance, and Clal Insurance currently manage less than 1.2 billion shekels in savings policies whose investment management is carried out by the three investment giants, compared to a peak of almost 4 billion shekels. The decline in the volume of managed assets occurred mainly in the last 12 months, during which savers withdrew about 1.4 billion shekels from the various tracks of the savings policies in question. The redemptions came mainly from the general tracks, where the bulk of public funds are concentrated, after their performance was significantly weaker compared to investment alternatives in Israel.
High management fees
The savings policy category currently manages about 130 billion shekels compared to about 70 billion shekels in investment provident funds (Kupat Gemel Le-Hashkaa). Both products serve as short- and medium-term savings channels, but there are fundamental differences between them. Savings policies are marketed only by insurance companies, through insurance agents who receive a commission on every sale. Therefore, management fees in them are usually higher than those of investment provident funds, and in many cases, the net return to the saver is also lower. According to industry estimates, about 40% of the management fees in the first year are transferred to the insurance agent, alongside a one-time bonus that can reach up to 10,000 shekels for transferring a client. The collaboration with foreign investment managers is also reflected in the management fees. In the policies of The Phoenix and BlackRock, they ranged from 1.35% to 1.55% per year, compared to about 0.8%-1% per year in regular savings policies. Despite the high price, the initial success of The Phoenix, which was the first to launch such a collaboration as early as 2022, led competitors to seek their own international partners. Thus, Harel Insurance signed a cooperation agreement with Fidelity, one of the largest asset managers in the world, and in September 2024 launched two tracks — general and equity. Two months later, Clal Insurance also launched three tracks in cooperation with State Street — general, equity, and bonds.
However, the momentum changed quickly. In the last 12 months, the general tracks of the policies in question showed quite weak returns. The general track of Fidelity within the Harel Insurance savings policy recorded a negative shekel return of 4.7% in the period between June 2025 and June 2026. This is a return before management fees, so after their collection, the actual loss approached 6%. The general track of BlackRock through The Phoenix yielded a return of only 0.7% during that period, while the general track of State Street within the Clal Insurance savings policy settled for a return of 0.6%. For comparison, training funds (Keren Hishtalmut) in the general track in Israel yielded an average return of about 14% during that period, a gap that showed savers how much the international tracks lagged behind the local capital market. One of the main reasons for this was the weakening of the dollar. The tracks managed by foreign asset managers are almost entirely exposed to investments outside Israel, and therefore also to changes in the exchange rate. In the last 12 months, the dollar weakened by 8.4% against the shekel, and the damage to the savers' shekel return was significant.
Looking longer term, the gaps between the tracks are even more prominent. Since its launch in January 2022, the general policy of The Phoenix, managed by BlackRock, has yielded a cumulative return of 33%. In contrast, the Harel policy managed by Fidelity recorded a negative return of 10.9% since its launch in September 2024, while the Clal policy managed by State Street lost 4% since it was launched. For comparison, the S&P 500 index yielded a shekel return of almost 14% during that period. However, it is important to note that the American flagship index is not the official benchmark of these policies, because they are not solely equity-based. Each track has its own benchmark, which usually includes a weighting of stock and bond indices, but this is not public information, but rather provided only to savers.
The collaboration between Israeli insurance companies and foreign asset managers began, as mentioned, at the initiative of The Phoenix, which is also the largest player in this category. In January 2022, the company launched three new savings tracks managed by BlackRock, the world's largest asset manager, which manages assets worth more than 15 trillion dollars. The medium- and long-term savings department of The Phoenix, headed by Or Harush, sought to offer savers broader exposure to global markets, and therefore launched three tracks — equity, general, and credit and bonds — all of whose investments are carried out outside of Israel. In retrospect, the timing of the launch was particularly successful. 2023 was characterized by an unusual gap between the performance of the Israeli capital market and Wall Street. While the TA-125 index rose by only about 4%, the S&P 500 index jumped by about 43%. The sharp increases in the US came against the backdrop of the breakthrough in the field of artificial intelligence after the launch of ChatGPT and expectations for the end of the interest rate hike cycle. In Israel, on the other hand, the capital market was negatively affected by the crisis surrounding the judicial reform and later by the outbreak of the Iron Swords war. The performance gap pushed many Israeli investors to increase exposure to global markets, and the tracks of The Phoenix and BlackRock provided an available solution for this. As a result, managed assets grew at a rapid pace, and less than two years after the launch, the three tracks together already managed assets worth 3.7 billion shekels — an exceptional amount for a completely new product. The general track was the largest and in September 2024 managed assets worth 2.6 billion shekels. The equity track managed more than 900 million shekels, while the credit and bond track remained relatively small and failed to cross the 200 million shekel threshold.
However, since then the picture has changed almost completely. In the last two years, the Israeli capital market has shown a sharp excess return compared to most markets in the world, partly against the backdrop of the improvement in Israel's risk perception following security developments and military successes. The TA-125 index jumped by 104% in the last two years while the S&P 500 index yielded 38% in dollar terms during this period, and the strong performance of the local market reduced the desire of investors to transfer funds to tracks focused on overseas investments. At the same time, the weakening of the dollar and the weak returns in the international tracks accelerated the pace of redemptions. Thus, a large part of the fundraising that The Phoenix carried out in the first years was erased, while Harel and Clal, which launched the products only in September 2024, entered the market after the momentum had already passed. The two managed to raise only tens of millions of shekels, and failed to build significant asset volumes.
"Do not evaluate shekel return"
Clal Insurance and Finance stated that it “is showing leading performance in the last year in most of the investment tracks it manages, in savings policies, training funds, and pension funds, as emerges from the published return data. Regarding the cooperation with State Street, it is important to clarify that Clal does not enjoy excess profit in managing this track compared to other investment tracks managed by it, and they reflect the receipt of investment management services from one of the largest and leading investment managers in the world. It is also important to emphasize that in recent times the Israeli capital market has shown excess performance compared to many markets in the world. Since the launch of the track until today, the dollar has weakened by about 20% against the shekel, therefore evaluating returns in shekel terms alone does not reflect the full investment performance. It is not correct to look at the performance of long-term savings products for a short period and there is great value in diversifying the investment portfolio between different products and managers, and in particular first-class global managers”.
