Fund management firms earn NIS 1b a year in fees
Many may wonder why the banks are putting up such a fight over the Bachar recommendations to have them sell off their mutual and provident funds. But the answer is simple.
Many may wonder why the banks are putting up such a fight over the Bachar recommendations to have them sell off their mutual and provident funds. But the answer is simple. According to a Haaretz investigation, the banks earn around NIS 1 billion a year in management fees from these funds. The two largest banks, Hapoalim and Leumi, annually each make NIS 350 million in fees from their funds.
Calculating the fees is not an accurate science. The survey took into account the size of the funds in the industry and the average level of management fees (charged as a percentage of monies managed in the fund).
Some of the funds are privately held, and their financial breakdown is harder to ascertain. How interesting it would be to know how much is earned by the individuals in this lucrative field; Zvi Stepak and Shlomo Simnovsky of Meitav; Shmuel Lev and Ehud Shiloni of Analyst; Zvi Lubatsky, Immanuel Kook and David Weisman of IBI; Yaakov Weinstein of Afikim; Shmuel Frenkel and Ron Levkovitz of Epsilon; Gilad Altschuler of Altschuler Shaham; Rami Rahimi of Remko; Victor Shimrich and Ido Neuberg of Apax; and others.
Haaretz' survey concluded that the fund sector manages a total of NIS 95 billion, and the fund managers earn NIS 1.3 billion a year in management fees. The banks dominate the sector, managing 87.2 percent of the funds, although they take home only 78.6 percent of the annual income. The private brokerages and fund managers earn some NIS 270 million a year in fees.
The largest banking company operating in the sector is Lahak, part of the largest bank, Hapoalim. It manages more than NIS 18 billion although it only ranks third in its fee income - NIS 176 million a year. Psagot fund managers of the Leumi group are third in size of funds managed, but come first in fees due to their fund categories, which charge higher rates than Lahak's shekel-based funds.
Of the private brokers, Meitav comes top, with annual income of NIS 59 million. This fee revenue puts the brokerage ahead of both First International Bank's Dikla fund and United Mizrahi's Emda fund, which manages almost twice as much as Meitav does.
Analyst, another private brokerage, manages some NIS 1.6 billion in funds, and earns NIS 53 million income. Some 62 percent of its funds are share-based, the highest ratio for the large funds. Meitav, for comparison, invests 45 percent of its assets in share-based funds.
Nitzan Cohen adds: The public is getting the point that investment funds managed by brokerages have often outperformed funds run by the banks. From the start of 2004, so-called "private funds" have raised NIS 290 million in net terms while the banks have suffered net withdrawals of NIS 990 million from the provident funds they run.
In August, the general public deposited NIS 56.8 million net in provident funds run by brokerages, while withdrawing NIS 15.5 million net from bank provident funds, according to treasury figures.
The biggest beneficiaries of the recent public penchant for privately-run funds are DS Securities (which has more than NIS 2 billion under management in provident funds), Analyst, Excellence and Meitav.
One worrisome fact was negative accrual in severance funds, which reported a downswing of NIS 64.6 million. These funds pay compensation to workers who get fired.