Since the 2006 tax equalization, institutional investors have increased their proportion of medium and long-term instruments.
Israeli households withdrew NIS 80 billion in savings plans in 2003-05 the Bank of Israel says in its annual report, to be published next month. Most of the money was channeled to mutual funds, including shekel deposits, in the wake of the tax reform and equalization of tax rates in the Rabinovich reform, which came into effect in January 2006.
Since the tax equalization, institutional investors (provident funds and insurance companies) increased their proportion of foreign medium and long-term instruments from 2.6% of their investment portfolios at the end of 2004 to 8.2% at the end of 2006. The proportion of investment in foreign assets is still below the 25% average in similar countries.
The Bank of Israel says that since the Rabinovich reform, institutional investors and households have been revising their investment portfolios, making them more liquid and more diversified. This process has positive effects on portfolio management and makes the financial markets more sophisticated. Investment in marketable assets has grown, which has increased households’ flexibility between various investment instruments and improved their ability to manage portfolios. The greater involvement of households in financial markets has also increased market competition and helped make them more sophisticated.
Published by Globes [online], Israel business news - www.globes.co.il - on March 25, 2007
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