New adviser plans Israeli index fund
December 14, 1998
TransNations Investments of New York is developing a new fund based on a proprietary Israeli equity index. The Amidex-35 Index Fund will invest in approximately three dozen Israeli companies that are traded on the Tel Aviv or U.S. stock exchanges. The no-load fund is currently in SEC registration and expected to be offered in February.
There will be little basis for comparing this fund's performance with others of its peers since there are currently no U.S.-based open-ended, no load funds which invest in Israeli securities. In March of 1996, the New England Funds introduced its Israel Growth Fund. But that fund never attracted many assets and was merged with New England Investments' Star Worldwide Fund.
The Amidex-35 Index Fund will be TransNations Investments' first mutual fund.
There has been unprecedented growth in the economy of Israel over the past couple of years, says Cliff Goldstein, the fund's newly appointed president and chief executive officer. Goldstein is currently a managing partner at the law firm of Webber, Goldstein, Greenberg & Gallagher in Philadelphia. The country's growth stems from the influx of venture capital, decreased defense spending, continued privatization and advances in the formal peace process with the Palestinians. Israel has also tackled inflation which only ten years ago ran as high as 400 percent, said Goldstein. Annual inflation is now in single digits.
Israel is now the second largest recipient of outside investment capital behind the U.S. Those assets have funded massive research and development initiatives in the Israeli computer hardware and software, telecommunications, biotechnology and pharmaceutical industries, said Goldstein. Israel is right behind the U.S. in the number of new high tech companies it produces.
But Israel's greatest resource is probably its people. Israel has the highest per capita number of engineers, said Sam Wildeman, assistant vice president with BEA Associates in New York, adviser to the closed-end First Israel Fund, introduced in 1992. The move away from huge defense spending has led to many ex-military personnel developing their own technology companies, he said. In addition, Israel has a literacy rate greater than that of the U.S. and more than one in four Israelis has attained a college degree, according to TransNations.
The Amidex 35 Index Fund will mirror the stocks expected to be included in the new Israeli Amidex 35 Index. TransNations will be introducing the new index at the same time the fund will be made available to the public. The index will be reset at the beginning of each calendar year. The fund plans to invest half of the fund's assets in companies traded on the Tel Aviv Exchange and half on the major U.S. exchanges such as NASDAQ, said Goldstein.
Boaz Rahav, the former chief economist for the Government of Israel Ministry of Finance in New York, will be the fund's manager. He was previously a trader and fund manager with a large Israeli brokerage firm.
TransNations is hoping to ally with several marketing and distribution companies, said Goldstein. He declined to name them. The company plans to market to pensions and foundations as well as in the direct-to-investor channel.
"Indexing has become a much more popular way to move into international markets," Goldstein said. TransNations hopes to lure those who already have a vested interest in Israel or who seek to financially support the nation.
TransNations also is planning to create an Israeli bond fund and a bank certificate of deposit-based certificate program, whose interest would be linked to an Israeli index, said Goldstein.