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Since the public outcry over the regulatory problems in euro investments, not much has been done. Fund managers may have complained, but the most the Securities Authority has done is not to approve any new euro funds, while at the same time, taking no steps against funds already up and running.

The failure of the regulatory authorities to keep up with the investment market poses some worrying questions for the fund managers, while even the proposed law amendments have aroused reservations by traders.

Among the possible areas of contention, are that the new euro funds are keen to invest in government bonds traded in Europe, most of which are traded over the counter (OTC), an entire field that is not dealt with in the current legislation.

The current law permits the funds to invest in government bonds only on ordered markets, where the trade is quoted by at least two market makers. If the new funds stick rigidly to the law, then they are unable to buy these bonds, and have to make do with the less negotiated and riskier bonds.

According to the new amendments proposed by the Securities Authority, a fund could buy bonds only if that bond has produced a prospectus and if it commands trade of over $500,000. But the fund managers contend that they have just cause in wanting to buy bonds of smaller trading sums.

In addition, there has been criticism expressed over whether the funds are responding only to the demands of the market, and whether they take into account the good of the public, or only the good of the fund. For example, Tel-Tech funds that invested in those shares listed in the Tel-Tech index were launched at the beginning of 2000 when Nasdaq was at its height. Investors in these funds have been badly burnt. Though there was no reason to wait for the end of 2001 to launch such funds, investors may wonder if the fund managers only wake up to new opportunities at the wrong time. Hence all the fanfare over euro funds when the launch of the euro in notes and coins approaches, though the currency itself was born in 1999.

The five euro funds currently in operation manage a total of NIS 600 million, though only three of these invest in European government bonds. Two funds run by Israel Discount Bank along with Bank Hapoalim's euro fund, were all launched before the Securities Authority expressed its opinion on the matter, and they have therefore been permitted to continue their operations until the law is amended.

The exceptional fund is Leumi Pi, launched only one week ago and which has already attracted NIS 200 million.