Public Pulling Pots of Money Out of Fixed-income Mutual Funds

Prisma among the worst-hit, but it still likes the shekel for the medium run

The Tel Aviv market reversed direction in the last hour on Wednesday, and closed in the green. But mutual funds lost large amounts through redemptions and the worst-hit were mutual funds specializing in fixed-income instruments.

On Wednesday alone half a billion shekels was withdrawn from investment funds. From the start of the week, the public has withdrawn a billion shekels from major investment funds.

Prisma is believed to have suffered the heaviest withdrawals, in part because of its sheer size an din part because it has more fixed-income funds. From Sunday to Thursday this week ,Prisma funds saw more than half a billion shekels evaporate, of which NIS 200 million to NIS 250 million was yesterday alone. Today the bank has been suffering from heavy redemptions as well.

The manager of one of the big investment firms commented yesterday that he wasn't surprised the public was pulling out of fixed-income mutual funds, while linked-asset funds suffered not at all. Given how low yields had sunk last week, he said, with long-term fixed-income funds trading at yields of 4.5%, there is no point in investing in the shekel.

At present levels of 5.5%, it makes rather more sense, he added.

Prisma's Golan Sapir on the other hand thinks it's a mistake to abandon the fixed-income funds at this point. The recent correction to the shekel was violent, he says. It was caused because of good macroeconomic data in the U.S., which lifted U.S. yields and following that, yields in Israel as well.

Prisma continues to view shareholders as attractive and likely to outperform in the medium run.