For the richest Israelis, 2014 was a very good year: The 500 wealthiest’s total assets reached $140 billion as of May 15, according to TheMarker’s latest survey, up from $110 billion in a year ago and just $52 billion in 2009 when the rich, like everyone else, were hit hard by the global recession and stock market downturn. The number of billionaires grew by ten to 84 last year.
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Overall, income inequality in Israel has been getting less severe, but the share of all income going to the wealthiest 10% climbed to 14.9 times the share going to the poorest 10% in 2013, according to the Organization for Economic Cooperation and Development. That was an increase from 12.5 times in 2011 and 13.4 times in 2007.
Meanwhile, Prime Minister Benjamin Netanyahu’s new government is showing itself to be tycoon-friendly, backing down on Antitrust Commissioner David Gilo’s plans to break up the natural gas cartel. Avi Berger, the director general of the Communications Ministry and the driving force behind broadband Internet competition, was fired within days after Netanyahu assumed the communications portfolio.
One of the first acts of the new finance minister, Moshe Kahlon, was to name a committee to outline plans for more competition in the banking sector, but he faces strong opposition from the banks themselves and the Bank of Israel.
Yet the wealthiest Israelis do not really need Netanyahu to become even richer. Near-zero interest rates and a stock market trading at a record high has raised asset prices held by the rich of the world and of Israel. Since the financial crisis in 2008 they have been rapidly getting richer and richer. The average wealth of the richest 500 grew some 5% to 10% last year, while the average Israeli family saw almost no change at all in its wealth.
The annual survey by TheMarker, now in its 14th year, adds up the assets and subtracts the debts of the wealthiest Israelis based on estimates by the editorial staff. They include holdings in publicly traded companies and estimates for the value of private holdings. The value is based on an exchange of 3.90 shekels to the dollar.
On that basis, the richest Israeli (in Israel) is Patrick Drahi, who joins the list for the first time and whose net worth is an estimated $16.5 billion, of which $15.8 billion is in publicly traded shares.
Drahi comes in far ahead of the No. 2 on TheMarker’s list, Stef Wertheimer, who, along with his family, has a net worth of $8.25 billion after selling his Iscar tool-making company to Warren Buffett.
Drahi has operated out of Israel for six years and controls Hot Telecommunications, but as the son of Moroccan Jews who immigrated to France, he is still known in Israel as the French investor and his Israeli interests are a small part of his holdings.
Over the past year he has been on a furious and unprecedented buying spree. In April 2014 he made his biggest acquisition ever, buying the French cellular operator SFR for 13.5 billion euros ($15.2 billion) in cash. At the end of last year he bought Portugal Telecom for 7.4 billion euros, and at the end of May, Altice, which he controls, announced it was entering the U.S. market by buying the cable company Suddenlink Communications for $9.1 billion.
Drahi did not pull off an offer to buy the U.S. cable operator Time Warner for $55 billion, but this is certainly not the end of that story. Drahi’s personal holdings are almost not leveraged at all – the debt is almost all inside the companies.
With an estimated $5 billion in net assets, the third richest Israeli is Shari Arison, an heir to the Carnival Cruise Lines fortune and owner of Arison Investments, whose flagship holding is Bank Hapoalim.
Next down on the list Arnon Milchan, who launched a hugely successful Hollywood producing career with “Pretty Woman” and is worth $4.2 billion. In Israel, he is a shareholder of the Channel 10 television broadcaster. No. 5 Yitzhak Tshuva made his fortune in real estate and construction but in recent years has shifted to energy, with his Delek Group holding large stakes in Israel’s two biggest natural gas fields —Tamar and Leviathan. Tshuva’s net worth is estimated at $4 billion.
Gil Schwed, founder and CEO of Check Point Software Technologies, is seventh on the list with net assets of $3.1 billion. No. 8 Teddy Sagi was born in Tel Aviv but is now based in London, where he has built up an estimated net worth of $3.5 billion based on Playtech, a gambling software and services company he founded, and as a majority shareholder of Market Tech Holdings, which owns London’s Camden Market.
Idan Ofer, valued at a net $3.25 billion, is an heir to the Sammy Ofer shipping fortune and controls the holding companies The Israel Corporation and Kenon Holdings, whose assets include Israel Chemicals. His brother Eyal Ofer is No. 10, with an estimated net worth of $2.4 billion, based on shipping and real estate interests abroad.
In between them, at ninth with $2.8 billion, is Haim Saban, who built a career in Hollywood starting with the “Power Rangers” children’s series. In Israel, he once was a controlling shareholder in Bezeq and today owns cellular provider Partner Communications.
Interestingly, among the top 10 wealthiest, only three – Wertheimer, Tshuva and Schwed – made their money in Israel. Despite Israel’s reputation as Startup Nation, only one (Schwed) earned his billions in high-tech.
The most influential person on the list in Israel is Tshuva, who controls Tamar and Leviathan together with the U.S. company Noble Energy.
Apart from Drahi, other new names on the list of the 500 this year: Yakir Gabay, who heads a real estate and hotel empire in Germany and has a net worth of $1.6 billion; Eyal Ravid, owner and CEO of the Victory disocunt supermarket chain, with a mere $63 million; and Haim Tayeb, a moshavnik who became a multimillionaire and conducts his business in secret in Britain, whose worth $60 million.
Are you rich because you own companies? Wonderful, since most companies rose in value in the last year.
Did you make a killing on an exit, and most of the money is sitting in the bank or under the management of your private wealth manger? Fantastic, since all types of securities rose last year. The TA-100 index gained 11%, U.S. stocks were up 10%, and if you diversified globally that was even better: The MSCI World Index, which reflects all global stock markets, climbed 44% in 2014.
Real estate moguls? Excellent too, with about a 20% rise in property values in Israel, as well as for real estate investment trusts on Wall Street. Even the stodgy bond market had a great year.
There were a few sectors that did less well, for example those invested in oil and other energy products, as oil prices plummeted. or if you had major holdings in Russia as the ruble took a beating. Global trade slowed, and the prices of many commodities fell. But the average rich person saw his or her wealth grow by any historical standard, even if all they did last year was sun themselves on their yacht, refrain from making any deals and just letting their money work for them.
The rise in asset prices owned by the wealthy is not a matter of chance but of government policies, whether in Israel or around the world. The most important feature of the Western economy over the past five years is the zero interest rates – in some cases even negative rates – alongside the massive printing of money by central banks under a policy known as quantitative easing.
Zero interest rates have caused asset prices to shoot up, and it is of course the wealthy who have benefitted the most, since they tend to own real estate, stocks, bonds and companies. The rest of the public continues to see its standard of living tread water, or even sink.
The world’s finance ministers and central bank governors say their policies are meant to help the middle class and unemployed. By making the price of stocks, bonds and real estate so high and therefore risky, the rich will be afraid to invest in them and put their money instead in things that provide economic growth like factories.
The problem is that in the meantime this theory isn’t working, or barely. Even though stock markets are at record levels, the rich are afraid of over-capacity in industry and that the global financial crisis is still not over. They want to remain liquid for fear of another crisis.
Accumulating wealth isn’t a one-way street. Some rich Israelis who didn’t suffer losses last year, among the best known being Nochi Dankner, who lost control of the IDB group last year and is now fighting charges of share manipulation; and Motti Zisser, a real estate tycoon who dropped out of the 500 list a long time ago. Eliezer Fishman left the list last year, too, a victim of Russia’s economic downturn. But these are truly the exceptions.