Irit is retired. A few months ago she moved the money in her advanced training fund (keren hishtalmut) from the Kahal fund run by Migdal Insurance to the Tavor fund under the management of Prisma.
Last week Irit woke up one morning to a very black dawn, after it turned out her new fund and money had lost 8% of its total assets in only one month.
Irit was not alone.
Members of the Hermon provident fund, also run by Prisma, are in mourning this week, just like their compatriots at Tavor. True, just about all provident and advanced training funds lost big in January, but those two funds outdid everyone else and caused their savers a huge 8% loss in just a month. Other funds made do with "only" a 3% to 4% loss in January.
Solid as the rock
Hermon and Tavor, named after the two famous biblical mountains, are relatively staid, solid investments, whose past performance was good. January's results are a serious investment management failure for them. Prisma's investment managers made some dangerous bets with investments, and the result was an extremely exceptional loss, which raises serious doubts about the investment managers' decision-making process. Together, the two funds manage a total of NIS 2.6 billion.
In general, when talking about long-term savings we should not attach any special importance to any month's yields; or even that of a quarter or even a single year. If the investment is for six years, such as in an advanced training fund, or for 15 years or more as in a provident fund; there is no reason to pay much attentions to a nice return in any given month, or a particularly bad one either.
In that case, there is certainly room to wonder why monthly yields continue to be published month in month out. Why bother investors with such irritating, continuously changing information?
Did investment managers abuse their trust?
Provident funds can certainly claim that these constant announcements and the fierce competition between the firms managing the funds have caused investment managers to take ever larger risks.
But this is a pretty bogus claim. A long-term investment manager who works according to short-term considerations and pressures and takes not very calculated risks is simply abusing his trust.
The case of Prisma and its funds certainly requires an in-depth investigation by the Finance Ministry's capital markets commissioner.
The regular announcements on the returns of the funds is intended to allow investors to take responsibility for managing their savings, to increase their level of involvement in their investments, and to take advantage of the wide range of investment opportunities open to them.
In the past, when there was no information and no competition, we never knew who was doing what with our money - and it certainly showed in the returns we earned.
Today, we supervise our own investments, follow their performance ourselves; and in particular we can transfer our own money from one fund to another at any moment.
And that is why retired Irit received a call this week from Migdal, which volunteered to tell her how much she had lost by moving her money to the Tavor fund; and asked her to "return home" - along with her remaining money.
Is it worth it for her to go back? Not necessarily.
There are funds which produced higher returns than Kahal over the long-term, and still do. An exceptional negative return from Hermon or Tavor is still an excellent opportunity to go shopping and examine the rest of the market.
But it is important not to forget the old tried and true saying: past performance says nothing about the future.
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