Israel's 100 most influential people this Jewish year / Your future is in their hands: Money managers
Those entrusted with managing our retirement funds have to serve two conflicted masters: the investors and the controlling shareholders. Who wins in these situations?
Total financial assets currently held by Israelis are estimated at NIS 2.6 trillion. A host of money managers at Menora Mivtachim, Migdal, Psagot and Clal Insurance handle peoples' savings, which are invested in mutual, provident and pension funds, as well as in managers' insurance (bituah menhalim ) and managed investment portfolios. These funds are mainly designed to support investors after their retirement. In exchange for appropriate fees, fund managers are responsible for handling the largest and most important investment decisions most of their clients will ever make, as they attempt to guarantee maximum income following retirement.
The fund managers answer to their controlling shareholders, whose interests may conflict with those of the small investors. Over the next five years, a serious test of loyalty is expected, as more than NIS 200 billion in corporate bonds mature. In 2013, corporate bonds worth NIS 20 billion, carrying 10% yields, are due to mature. In light of the economic slowdown, some of this corporate debt may require settlement arrangements. Will the fund managers serve their clients or their bosses?
In precedents set by fund managers in debt settlements with Delek Real Estate and Ampal, which owe bondholders NIS 2 billion and NIS 850 million, respectively, no real action beyond threats was taken against these companies.
Not all institutions are controlled by shareholders with conflicting interests. The more independent ones realize that growing their business requires higher yields for their clients. Thus, for example, portfolio asset management companies such as Yelin Lapidot and Altshuler Shaham have raised billions of shekels over the last year. However, most funds are still controlled by shareholders with conflicting interests.
Will fund managers understand in the coming year that their prime responsibility is to their clients? If not, many people will not be able to retire or will become impoverished retirees. Investors should compel their fund managers to protect their interests under threat of transferring their business elsewhere.