In this complex and competitive world, Yaacov Moreshet, owner and managing director of Hilat Shoham is like a boxer who ties his hands together before entering the ring. Despite this self-imposed handicap, his mutual funds still manage to outpace many of the competing funds.

The restrictions Moreshet has dictated for himself do not stem from stupidity or disability, but rather from his values system. As a religious Jew he feels it is not enough to say "with God's help," and pray; one must also manage one's money according to halakha - Jewish law.

"I wanted to demonstrate that it is possible to manage investments according to halakha, but with a high level of performance," says Moreshet. "Throughout the world there is a concept of values in investments, and it is acceptable for investors to want to know where their money is. In Israel, however, most investors are interested only in the yield. Many religious [Jews] are simply unaware of the halakhic aspects of investing. There are ultra-Orthodox Knesset members who will send inspectors to close businesses on Pesach or Shabbat, but who do not realize that they themselves, through their mutual funds and continuing education funds, own [part of] the businesses they are closing."

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What is the meaning of money management according to halakha? The Hilat Shoham board of directors includes ultra-Orthodox Rabbi Yosef Shalom Elyashiv, who makes sure everything is kept kosher. Moreshet also constantly consults Rabbi Aryeh Dvir, who helps him screen companies to make sure there are no violations of halakha.

"There is no doubt that this restricts me," admits Moreshet. "I cannot invest in companies in which others can. Israel Chemicals' share price has been rising for a while, but I cannot invest in it as the Dead Sea factories work every day of the year. There are also corporate bonds issued by car rental companies that rent cars every day of the week, and I cannot invest in them."

Due to these restrictions, the Israel Securities Authority (ISA) would not approve the definition of Hilat's Gmisha fund as share-oriented. The ISA was skeptical there would not be enough shares to operate the fund.

Moreshet has also encountered problems in investing in corporate bonds (issued by commercial companies. They are considered riskier than government issued bonds, and therefore offer higher returns.)

"According to halakha, if someone lends money, he must not charge interest if he is not assuming any risk," explains Moreshet. "Thus, in order to purchase a bond I must first check whether the company is worthwhile. Then I need to sign a special halakhically recognized loan permit with the company, such that the loan becomes a kind of business partnership, assuming a level of risk."

Matters are even more complicated when it comes to foreign investments. When Moreshet invests in a foreign company, he must conduct a thorough investigation to ensure the company has no Jewish shareholders.

Considering the restrictions with which Moreshet is coping, Hilat's yields can truly be considered miraculous. The Shoham Gmisha mutual fund recorded a yield of 34 percent in the past year and 108 percent over the past three years. In these same periods the leading Israeli shares indexes had much lower yields: The general index rose by 12.8 percent over the past year and by 76 percent in the past three years, while the Tel Aviv 25 index rose by 20 percent and 100 percent, and the Tel Aviv 100 index by 19.5 percent and 95 percent.

Even Hilat's dollar- and shekel-linked funds performed well, and three of the funds even received the maximum 5-star rating awarded by Kranot Meida Zahav rating company.

"Due to my restrictions," explains Moreshet, "I focus on the big, negotiable shares. I try to invest in shares that foreign investors are buying, and don't deal with shares that I cannot sell within a day. My goal is to be a 'price taker,' a small investor among big investors, whose activities are marginal and will not affect the share price one iota. I play with several levels of exposure, use the leverage of options, change the [funds'] exposure between various sectors and constantly alter the shares ratio in the portfolio."

Hilat's restrictions actually allow the fund it manages considerable flexibility.

"My fund has unlimited flexibility," says Moreshet. "I fluctuate between 0 percent exposure to the market to 100 and even 150 percent, via loans and credit and options leverage. My average is 100 percent shares. I use a lot of strategies to hedge against risks, and to profit from the market's volatility."

Moreshet's methods result in a lot of transactions for the funds he manages.

"I conduct a great many transactions each day, and my trade volume is very high," he says.

Moreshet simplifies the options for his customers. "All the investment houses open 50 funds," continues Moreshet, "and every so often write off the ones that are not performing well or change their policies and retain the better funds. This is just like a cell phone company that offers consumers dozens of service packages. The client is confused by so many funds. The tactic is to confuse the customer with an abundance of products and then recommend 'the right one' at the opportune moment. I have just three funds. Anyone who wants a solid investment goes with my shekel-oriented fund."

Moreshet says investment management according to halakha is not recommended for business-marketing considerations.

"Most of the ultra-Orthodox in Israel have little means," he says. "They do not have bank accounts or credit cards. This means that our market sector is small. In general, my dependency on rabbis and halakha puts me in a double bind. The ultra-Orthodox are suspicious of me and the secular keep their distance. There are other funds that hope to profit by targeting the religious population (two other kosher funds are Millennium Ayin Tova and Rakia Mehadrin - H.A.), but this is a mistake. The ultra-Orthodox are not necessarily attracted by the halakhic [aspect of the fund]. What is important to them is results. With my fund, halakha is in the background."

Moreshet relates that he has many secular clients who are attracted by the funds' performance.

"People understand that chocolate can be tasty even when it is kosher," he says. "So they come to me. This is also the reason I have embarked on a campaign designed for the entire population. It bothers me that I am near the top of the fund charts, but only a few people know about it."