After receiving regulatory approval, investment routes that track the American S&P 500 index have become the dominant index-following routes in Israel. This shift occurred as a result of growing interest among Israeli savers for routes that follow the Nasdaq index, which saw a 44% increase last year. However, due to its sectoral nature, exposure to the Nasdaq index will be limited to no more than 50% in long-term savings routes.
On the other hand, the S&P 500 index remained unchanged by the authority. Israeli investors, from large institutions to individual savers, have been increasingly drawn to S&P tracks in recent months. Currently, around 80 billion shekels are managed in S&P 500 tracks across various savings products, accounting for more than 5% of the total 1.5 trillion shekels managed by pension funds and provident funds.
Despite high returns seen in S&P tracks last year at 30%, there are associated risks with investing solely in one index, particularly one that is heavily influenced by a few technology giants and exposure to the dollar. The trend towards passive products is a global phenomenon driven by reforms like this one. Hagai Oren, CEO of Meitav Gemel and Pensions anticipates continued growth in the market share of S&P 500 tracks due to these changes.
Meitav Gemel and Pensions has been a leader in adapting to American routes and transitioned from hedge funds to long-term savings products. By employing sophisticated monitoring methods and leveraging investment baskets, they achieved strong returns while outperforming competitors in S&P 500 tracks. Oren emphasizes the importance of expertise, active management within passive products, diversification and risk management especially with new regulations being implemented by Capital Market Authority.
As investors increasingly turn to passive products like S&P 500 tracks, there is a growing trend towards combining active and passive management strategies or creating diversified portfolios across multiple passive routes. This shift underscores the importance of guidance from pension advisors and dynamic risk management as they navigate this evolving landscape of index-following routes in Israel.
