v During the fourth quarter of 2014 the value of the public's financial assets portfolio increased by about NIS 27 billion, an increase over the previous quarter of about 0.8 percent in real terms, and reached about NIS 3.17 trillion at the end of December.
v The growth during the fourth quarter derived mainly from an increase in cash and deposits (about NIS 48 billion, 4.9 percent) and an increase of about NIS 23 billion (5.6 percent) in the tradable portfolio abroad. Some of the increase in these components was affected by the marked depreciation of the shekel vis-à-vis the dollar (5.3 percent) during the period.
v The value of the asset portfolio managed by institutional investors (excluding mutual funds) increased by about NIS 14.6 billion (1.2 percent) in the fourth quarter, to about NIS 1.3 trillion at the end of December. Most of the increase derived from growth in the value of the portfolio traded abroad, and an increase in the makam and government bonds portfolio.
v In the full year of 2014, the value of the financial assets portfolio increased by $200 billion (6.7 percent). This was mainly the result of an increase in the value of the tradable portfolio abroad and an increase in the current accounts and cash components and foreign currency deposits affected by the depreciation (12 percent) of the shekel. These developments contributed to an increase of about 2.5 percentage points in the share of foreign currency assets and a 1.6 percentage point increase in the share of foreign assets.
1. The total assets portfolio
In the fourth quarter of 2014, the value of the public’s financial assets portfolio increased by about NIS 27 billion, an increase of about 0.8 percent in real terms, reaching about NIS 3.17 trillion at the end of December.
The increase in the fourth quarter was primarily due to growth in the value of current accounts and deposits components (about NIS 48 billion, 4.9 percent) and in the value of the portfolio of tradable assets abroad by about NIS 23 billion (5.6 percent), primarily due to the weakening of the shekel vis-à-vis the dollar by about 5.3 percent. This increase was partially offset by a decline in the value of the tradable portfolio in Israel.
For the full year of 2014, the value of the portfolio increased by about NIS 200 billion, an increase of 6.9 percent in real terms.
It should be noted that in recent years, the rate of growth in the financial asset portfolio has accelerated, mainly due to price increases in stock markets in Israel and abroad. The ratio of the public’s financial asset portfolio to GDP was 291 percent at the end of December 2014 (Figures 2 and 3).
Asset portfolio composition: As a result of the weakening of the shekel against the dollar during 2014 (12 percent), there was an increase of about 2.5 percentage points in the share of foreign currency assets, and 1.6 percentage points in the share of foreign assets.
2. The securities portfolio, by main components
Shares in Israel
During the fourth quarter of 2014, the balance of shares held in Israel by the public declined by about NIS 20.5 billion (4.0 percent), to about NIS 494 billion at the end of December.
For the full year of 2014, there was a decline of about NIS 5 billion in the market value of the portfolio of shares held in Israel—net investment flow into stocks was offset by a decline in their value.
The distribution of share holdings in the Tel Aviv Stock Exchange indicates that the share of Israeli residents’ holdings declined in 2014 by about 2 percentage points, to around 83 percent, mainly as a result of a rapid increase in the value of nonresidents’ holdings in dual listed shares.
Bonds
During the fourth quarter of 2014, the value of negotiable corporate bonds in the portfolio declined by about NIS 14.7 billion (5.4 percent), to about NIS 259 billion at the end of December.
For the full year of 2014, the negotiable bond portfolio declined in value by about NIS 7.9 billion (3 percent). At the same time, there was an increase this year of about NIS 60.6 billion (8.2 percent) in the balance of the government bonds and makam portfolio, mainly through institutional investments and increased government commitments to the old pension funds.
Cash and deposits
The value of cash and deposits increased in the fourth quarter by about NIS 48 billion (4.9 percent) and for the full year of 2014 increased by about NIS 73 billion (8.9 percent). Most of the increase in 2014 in this component derived from the weakening of the shekel against the dollar, which increased the shekel value of foreign currency indexed deposits. It also derived from the increase in the public’s cash and current accounts balances. The increase was partially offset by withdrawals from unindexed deposits.
The assets portfolio abroad
During the fourth quarter of 2014, the value of the portfolio held abroad by Israelis increased by about NIS 19 billion (4.8 percent), reaching about NIS 451 billion at the end of December, which accounts for about 14.2 percent of the total asset portfolio. In the fourth quarter there were net realizations in foreign shares, primarily by institutional investors, after there were net investments in the previous quarters.
In the full year of 2014, the value of the portfolio held abroad increased by about NIS 77 billion (20.6 percent). The increase in the portfolio value was affected by a combination of the depreciation of the shekel vis-à-vis the dollar (12 percent), price increases abroad, and net investments abroad.
The value of shares held abroad increased by about NIS 44.6 billion (20.2 percent), and reached about NIS 266 billion at the end of December. The value of the tradable bonds portfolio abroad increased by about NIS 39.5 billion (31.6 percent), and reached about NIS 165 billion at the end of the year. Most of the net investments in the securities abroad portfolio was by households and by institutional investors. In contrast, there was a decline of about NIS 7.2 billion (26 percent) in the value of deposits at banks abroad.
3. The portfolio managed by institutional investors
The value of the assets portfolio managed[1] by institutional investors (excluding mutual funds) increased in 2014 by about NIS 116 billion (10 percent), to about NIS 1.3 trillion at the end of December. Most of the increase was in the value of assets managed by the new pension funds (NIS 35 billion, 19 percent), the old pension funds (NIS 32 billion, 9 percent), and insurance companies (NIS 27 billion, 10 percent).
The share of the portfolio managed by the institutional investors out of the public’s total assets portfolio remained increased during 2014 by about 1 percent, to about 40 percent at the end of December.
Exposure[2] of the portfolio managed by the institutional investors to foreign assets and to foreign exchange
The rate of exposure to foreign assets increased by about 1.1 percentage points in the fourth quarter (primarily due to a decline in total assets), to about 23.9 percent of the portfolio, in December. The increase in the rate of exposure to foreign assets characterized all types of institutional investors.
For the full year of 2014, the rate of exposure to foreign assets increased by about 3.4 percentage points. The largest change in 2014 was focused in the new pension funds, which increased the extent of their exposure to foreign assets by about 4.4 percentage points, to a level of 30 percent. (Since the mandatory pension agreement came into effect in 2008, there have been NIS 95 billion in net new investments)
The rate of exposure to foreign exchange, which is measured by the share of assets denominated in and indexed to foreign currency (including derivatives) increased by 1.4 percentage points in the fourth quarter, to 14.2 percent of total assets at the end of December. (There was an increase in foreign exchange assets in parallel with a decline in total assets.)
An analysis of net transactions in institutional investors’ foreign exchange assets shows that in the fourth quarter, the pattern of institutional investors’ activity in the market continued: There were net purchases by institutional investors of foreign exchange in derivative instruments—that is, a decline in the open balances in shekel/forex derivative instruments, which increased considerably in recent years. From August, when the depreciation in the shekel began, institutional investors invested about $1.1 billion in foreign exchange assets in parallel with net purchases of foreign exchange derivative instruments of $3.3 billion.
In the full year of 2014, the exposure to foreign exchange increased by about 1.8 percentage points—the value of foreign exchange assets increased by about $5 billion to about $43.5 billion—the combined effect of net transactions ($3.8 billion), the effect of stock prices, and the effect of the weakening of the shekel against the dollar, on the shekel value of foreign exchange assets.
4. Mutual funds
The value of the portfolio managed by Israeli mutual funds was NIS 261.5 billion at the end of December, about 8.3 percent of the public's total asset portfolio and about 15.6 percent of the tradable portfolio.
In the fourth quarter of 2014, for the first time since 2011, there were net redemptions (surplus of redemptions over issues, net of dividends), continuing the downward trend in net investment since the second quarter of the year. As a result of the net redemptions and the decline in asset prices, mutual funds balances declined by about NIS 8.8 billion (3.3 percent).
A breakdown of mutual funds by specialization shows that net redemptions in the quarter were concentrated in money market funds (a decline of NIS 4.1 billion, 7.3 percent) and in “other” bonds (NIS 3.4 billion, 3.3 percent), mostly corporate bonds. In contrast, there were net investment in the bonds abroad (NIS 2.9 billion, 41.5 percent) and in shares abroad (NIS 1.3 billion, 14.4 percent) components.
In the full year of 2014, the value of balances increased by about NIS 30.7 billion (13.3 percent), of which about NIS 26.7 billion was in respect of net investment.
Most investment was in the “other” bonds (NIS 14.1 billion, 17.1 percent) component—investments in general bond funds that were partly offset by redemptions in corporate bonds. This was in parallel to net issues in the government bond component (NIS 13.5 billion, 41.8 percent).
Further information and details on this subject are available at this link.
Graphs & Data[1] The managed portfolio—provident and severance pay funds, pension funds and advanced training funds, life insurance plans (guaranteed yield and profit sharing), excluding nostro investments. The managed portfolio does not include mutual fund assets.
[2] Estimates of members’ exposure (rather than exposure of the institutional investors themselves) to various risks in the portfolio managed for them by the institutional investors (excluding insurance policies with a guaranteed yield, where the risk is taken on by the institutional investors).