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The news that Prisma Investment House plans to sell its provident funds to Psagot and to merge its mutual funds with Meitav and Gaon, as reported by TheMarker Friday, prompted the firm's management to write a letter to worried workers.

The report provoked a storm among Prisma staffers, whose employment future now appears unclear. Ron Lubash, joint director of the Markstone Capital Group, which owns Prisma, dispatched what was meant to be a reassuring letter to workers on Monday.

"In light of the wide publicity, and despite my belief that actions, and not words, should dictate, I feel it is my responsibility, as chairman of Prisma and your proprietor, to clarify events as much as possible," Lubash wrote.

He told employees that the crisis in world markets can be expected to directly affect the assets management industry in Israel. The negative impact, Lubash said, is already being clearly felt.

"The entire industry in involved in a widespread process of merging, a process that is taking place silently for the most part at this stage. We are preparing, too."

But seeking to diminish the impact of gloomy headlines, Lubash told workers to keep things in perspective. "Naturally Prisma, as a leading industry competitor, is the focus of much interest, and of sharp criticism. I'm not complaining. But these are the facts. Nevertheless, it is important that we understand the true situation."

"Prisma", he went on to say, "will continue to be an important, leading participant in the assets management industry in Israel," and that "the headlines about the "dismantling" of Prisma are headlines, not reality."

Nevertheless, Lubash did not contradict the reports: "The plan for provident funds is good news for fund members. Prisma is considering merging its provident fund arm with Gemel, to become the largest company in Israel. Prisma will continue to be joint, active partners in this company."

He also confirmed to workers that merging its funds and portfolio management activities with a number of competitors is under consideration, which he also promised would provide greater impetus, with Prisma continuing to play a part in the joint management.

"Its no secret that the funds industry in Israel is shrinking, and we believe that this is the correct, forward-looking move," Lubash told workers, while emphasizing that the steps are still under discussion and may never come to fruition.