Pinchas Landau, John Boock launch rating company for mutual funds
Mutuals funds generally don't beat the benchmark, says Hebrew University's Prof. Haim Levy
Analyst, columnist and former journalist Pinchas Landau has teamed up with John Boock, formerly chief financial officer of Discount Investment Corporation (TASE: DISI), to launch an independent research and rating company for mutual and pension funds: Israel Funds Observer.
Landau and Boock are discussing collaboration with an international rating agency.
IFO's first act was to publish a comprehensive book, "Guide to Mutual Funds", in Hebrew and English. The impetus behind the move is the fact that that Israel's funds market has been transformed. The upheaval has radically "changed the stranglehold that the Israeli banks especially the two large ones held", the company says on its site, referring by the bye to banks Hapoalim and Leumi.
As the banks were forced by the Bachar reform to sell their asset management companies, new players entered the market, mainly insurance companies. While about it, the banks wrested sky-high prices for their funds, which promptly started to bleed customers as investment advisers at the banks stopped advising customers to invest in them.
Be that as it may, "competition has dramatically increased, as each fund manager tries to maintain and increase their market share and hence the need for professional, objective analysis," IFO says on its site.
The book contains information on more than 1,000 funds listed in Israel. IFO will be distributing it among licensed investment advisers, and will update the data on its website.
The 300-page volume also boasts article by Joseph Bachar, author of the Bachar reform, and by Dudu Lavi, manager of the mutual funds division at the Israel Securities Authority.
One of the main changes the Israeli bond market funds market has undergone, is exposure to the world. That hasn't happened in mutual funds, says Landau. It is high time their managers refreshed their outdated concepts and adopted international standards.
The main purpose of the book, says Landau, is to introduce fundamental concepts common in the mutual funds sectors of the world to Israel, where they are unknown. IFO also aspires to link between managers of Israeli mutual funds and foreign investors, he adds.
Pinchas Landau is brother of David Landau, editor in chief of Haaretz.
It seems that the industry needs a rating company. One might reach that conclusion from strong statements by Professor Haim Levy of the Hebrew University of Jerusalem's School for Business Administration today.
Why do mutual funds exist? Because of the claim that they know how to pick the best assets. But is that true? Definitely not. Mutual funds have no real knowledge and in most cases, they do not beat the benchmark index. Analyses are valueless because the market is efficient and sets the direction," Levy said today, at a conference that the university hosted.
Analysis and research are only of value in the case of new companies, Levy added. or, in the case of securities that aren't listed on any exchange, when there is no supply or demand to mediate the asset price.
Levy cited a study from 1966 which checked whether funds really do beat the market. It concluded that most didn't.