Are You A Shareholder In The State Of Israel?
You care; I know you do. You’ve worked tirelessly to build and strengthen the State of Israel ever since you planted your first tree in what is now a full-grown forest. You want to be impactful, relevant and a catalyst for others — to embrace intentionality across all your financial resources, to enter the next era of philanthropic investing and, in doing so, engage the next generation in Jewish life.
You’re frustrated with the constant barrage of headlines with the letters, B, D and S. You want to be “for” something positive, free to celebrate the innovation coming out of Israel and share in the economic success of the Startup Nation.
Why? Because it just feels right. And in this case, what feels right is actually a savvy and powerful financial decision.
In a world where the millennials and progressives in our midst are challenging us to adopt “mission-aligned” and “program-related” investments, Israel waits to be rediscovered.
It may come as a shock (and sound a bit crazy) but most of our Jewish communal and pro-Israel organizations have unintentionally divested or are significantly underweight in Israel in their portfolios.
This isn’t necessarily by design, rather by neglect. When was the last time you asked your financial adviser or consultant, “How much Israel is my portfolio?”
Didn’t realize you had to? Think again. The 2010 re-categorization of Israel from “emerging market” to “developed market” status changed the weight of Israel within global index benchmarks and thus within your portfolio. This “graduation” — along with the large number of Israeli companies (35 percent by market weight) that have gone public on exchanges outside of Israel — requires us to take a more proactive approach.
If you sit on an investment committee, a fiduciary board or are a stakeholder/donor of a pro-Israel or Jewish organization, this blind spot might have even deeper significance. It’s important to also ask, “How much of our assets are invested in companies or countries that are foes of Israel?” The response is likely to alarm you.
Countries like Qatar, UAE, Malaysia, Indonesia and Pakistan comprise 5-8 percent of the typical emerging market index-based and actively managed funds. This means that most of you, and the majority of the Jewish organizations that you care about, have three to four times more exposure to companies and countries working directly against your values (and our community’s mission) than in Israel itself.
This “unintended underweight” has occurred as the investment case for Israel grows ever-stronger.
Israel, as measured by the BlueStar Israel Global Index (BIGI), the benchmark for Israeli public equities (tracked by the ISRA ETF on the NYSE), gained 8.32 percent in the first quarter of 2017. Compare this to a surging U.S. market at 6.07 percent and the story begins to get interesting.
Take the longer view, over the past 10-year market cycle, and Israel has dramatically outpaced its International Developed (MSCI EAFE) and Emerging Market (MSCI EM) peers by 69 percent and 49 percent respectively.
In fact, Israel has been one of the top three developed economies for each of the last 10 years and one of the only developed countries to have positive economic growth during the 2008/09 financial crises.
With GDP growth at 3.8 percent in 2016, a credit rating of A+, record low unemployment of 4.3 percent, and a debt to GDP ratio of 62 percent (vs. 105 percent in the U.S.) Israel’s future economic success looks bright.
Its technology sector, as measured by the TA-BIGITech Index (tracked by the ITEQ ETF on the NASDAQ), continues to excel and excite, gaining 14.2 percent during the first quarter of 2017. This index comprised of the “start-ups that have grown-up,” like Mobileye (pioneers of autonomous driving, currently in the process of being acquired by Intel for $15 billion), CheckPoint, Wix.com and Nice have captured our imagination and are literally changing how we experience the world.
Israel is at the nexus of impact, values and sophisticated portfolio construction. Add the double-bottom line of helping to strengthen Israel’s economy, and the fact that investment is a specific antidote to divestment, and suddenly “mission- aligned” doesn’t sound progressive enough.
Raising an allocation to Israeli equities with your financial adviser — or in the boardroom of your favorite organization — just makes good sense. Align your values with your portfolio, challenge your favorite organization to follow suit, and become a proud shareholder of the world-leading companies that call the State of Israel home.
Joe Levin is the chief investment strategist at BlueStar Indexes and former chief development officer at the San Francisco-based Jewish Community Federation and Endowment Fund.