She's a BRIC

Brazil, Russia, India and China are red-hot

Ever heard of BRIC? No? Make a small note to get yourself updated on the latest hits of the frothing funds sector.

BRIC funds are the new buzz in the Israeli mutual funds market, and one of the ways the funds companies have of attracting new money. The BRIC countries - or Brazil, Russia, India and China - are the leading countries in the group of emerging markets.

The four are characterized by particularly high growth rates (an annual average of 6.4 percent over the past five years - three times higher than the average international growth rate) and constitute a magnet for investors and business owners from all around the world, including Israeli investors, who have started to channel large sums of money to the BRIC funds.

But these are not the only countries to which Israeli money has been flowing over the past six months. Israeli investors looking for high returns have been channeling their money into countries all over the world, with funds in Japan and even Turkey taking in hundreds of millions of shekels a month.

In January alone, the public has channeled some NIS 2.1 billion into stock-based funds that invest in overseas markets - over and above the NIS 4 billion invested in these funds in 2005.

Already today, funds specializing in overseas stock have NIS 11 billion in their coffers - more money than is invested in Israeli shares.

Sinking mutual funds

While Israel's small private brokerages are recruiting more and more clients, the provident and mutual funds belonging to the banks are bleeding. The trend continues, says Kranot Meda Zahav in a review for January 2006.

Bank Hapoalim's PKN and Lahak mutual fund management companies, and Bank Leumi's Pia, each lost a half-billion worth of assets in the space of that one month.

Ilanot Discount didn't do well either, losing NIS 260 million worth of assets in January 2006.

Since Markstone agreed to buy PKN for NIS 954 million, the mutual fund management company has lost a stunning NIS 3.2 billion worth of assets. Altogether Bank Hapoalim's two major mutual fund management companies lost NIS 5 billion in assets, in just three months.

Psagot, which is the biggest of the lot with NIS 19.2 billion under management, is the only bank fund that did not suffer from withdrawals in January: It raised NIS 90 million, mainly through its mutuals specializing in foreign stocks.

For its part, Afikim Consultant and Investments, the mutual fund management company purchased by Migdal Insurance, lost NIS 135 million assets in January 2006, or 5 percent of its total assets under management.

Afikim falls into the category of a private fund company. It is the only such private asset management company that lost assets in January; all the others posted net recruitment.