Mutual hedge funds approach NIS 4b

A stormy session took place in the Knesset Finance Committee on Monday on mutual hedge funds, a sophisticated investment product that makes a type of investment that was previously open to the wealthy and to financial institutions accessible to anyone. The product has been available in Israel for two years.

From data gathered by “Globes” on the performance of these “hedge funds for the masses”, it emerges that several of them managed to beat the leading indices on the Tel Aviv Stock Exchange, which had a dream year last year, but that the sector in general struggled to produce excess returns.

Six hedge funds yielded returns of over 51% (gross) last year, but the average for all the funds was 25%, about half the rise in the Tel Aviv 125 Index.

The average return for the funds covers a variety of investment strategies, with some of them focusing on overseas stocks or on bonds. In 2024, the average return was 29% (gross), slightly more than the rise in the Tel Aviv 125 Index in that period.

The returns reported by the mutual hedge funds are in gross terms, after management fees but before the deduction of success fees for the fund manager, which generally amount to 20% of the return.

The outstanding mutual hedge fund in 2025 was Harel Multi-Strategy, which made a dream return of 78%, and 164% over two years. It has NIS 641 million under management, making it the second largest of the funds, after More Bond Strategies, and it is aided by advisers from Micha Malka’s hedge fund Tulip Capital, such as Baruch Zibin and Moshe Gabay.

Harel Mutual Funds CEO Uri Shor says that the decision to consult stars of the traditional hedge fund industry paid off. “We decided to bring in a ‘superstar’ from outside, along the lines of a Ronaldo, so we chose Tulip,” he says, adding, “In our other equities hedge fund, which invests overseas, we joined up with senior people from Kai Capital. Last year, we raised a large amount in these funds. The money raised in the Multi-Strategy fund came mainly via investment advisers in the banks, who have still not entered this segment at full power. Only specific banks have come on board so far, and others are waiting to see a track record. The rest was raised were from family offices, financial consultants, and similar entities.”

In second place for returns is Meitav Long Short, which recorded a 68% return last year and 112% over two years. The fund is managed by Dani Ben Yair, a well-regarded veteran investment manager. In third place is the Focus Long/Short fund, which recorded a 58% return last year but does not have a two-year record as it was launched in mid-2024. In fourth place is the Yelin Lapidot Multi-Strategy fund, managed by the firm’s chief investment officer Yaniv Koren.

Regulation and tax advantage

Mutual hedge funds began operating in April 2023 following a decision in the Knesset on the advice of the Israel Securities Authority. They operate in a similar fashion to traditional mutual funds and are traded on the Tel Aviv Stock Exchange. The minimum investment is low, and they offer a high degree of transparency, monthly exit (and entry) points, and close supervision by the Securities Authority.

Thanks to the transparency, it can be seen that at the end of October the Harel Multi-Strategy fund was invested in Bank Leumi (7% of the fund), Bank Hapoalim (7%), Doral Energy (6.9%), and Teva (5.4%). At Meitav Long Short the main equity holdings were in Enlight Energy (5%), OPC (4.7%), Clal Insurance (4.7%), and Phoenix Financial (4.7%).

Mutual hedge funds offer a tax advantage over traditional hedge funds in which there is a tax event each year on gains. Investors in mutual hedge funds pay tax only on sale, as with a regular mutual fund, and over a period of years that can be a significant advantage, leaving more of the returns in the investor’s hands.

All the major players in the capital market have been drawn to offer this product. The pace of investment in the funds grew quickly, and by the end of 2025 they totaled NIS 3.75 billion, an increase of over 200% within a year. An industry source said that most of the growth stemmed from new investment, and the rest from the rise in the value of the assets as a result of the boom on the stock market.

46 mutual hedge funds currently operate in Israel, but the launch of new funds has been stuck in recent months, because the validity of the provisional order under which the funds operate has not been extended in the Knesset, and there has been no primary legislation on the matter. Dozens of new mutual hedge funds are estimated to be awaiting approval by the Securities Authority.

“Hedging is expensive

Lior Kagan, CEO of Meitav Tachlit Mutual Funds, says that the new industry “has had a good experience of the market in the past three years; there hasn’t been anything dramatically negative.” He stresses that the lower returns by some funds arise from heavy hedging costs. “Most hedge funds will fall in a period of falls on the market, since no-one hedges their portfolio 100%, because that would eat up all of the return. But they ought to cope better with a period of declines, and fall substantially less than the market,” he says.

Accessible to the general public

Yelin Lapidot’s Yaniv Koren explains that mutual hedge funds give their managers greater freedom of action in investment. “In a flexible mutual fund there is sometimes a minimum equities holding of 50%, but in a mutual hedge fund it can range from 0% to 100%, and the fund can use leveraging as well.” This allows one of the most popular strategies in the hedge fund industry, known as “long-short”. In this strategy, the investment manager buys shares for the long term in one company, and bets on a fall in the price of another share.

“This product has many advantages,” Koren says. “I see it being a growth engine for the mutual fund industry in the coming years, assuming that it is regularized by the legislator. It will be a golden opportunity to make hedge funds accessible to the general public.”

Published by Globes, Israel business news – en.globes.co.il – on January 20, 2026.

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