Unpatriotic in Tel Aviv

At these gay times, with Tel Aviv stocks advancing on fond expectations of a ceasefire in  the north, and with the Ashdod refinery being sold for top dollar in the south, it would be almost unpatriotic to kill the joy. Black thoughts of what might happen if a Zilzal missile smacks into Tel Aviv, or (horrible thought) the front expands to Syria (in which case Zilzals would be the last of our worries), or if Iran with its unconventional weapons becomes openly involved (in which case Syria etc.) - why dwell on that at this happy time? Let it alone!

Because we are dogged patriots, we shall not of course be killjoys. We would not entertain for a second the thought of what would happen if a Zilzal slams into Tel Aviv, nor would be of course wonder for a nanosecond how that might affect our portfolio.

Since there is no Zilzal, in our minds at least, and we therefore don't wonder if we would survive its impact, we don't trouble to wonder what our investments will look like if we survive, and whether we have prepared for that unthinkable eventuality.

If however you had an ear to the ground, you heard Yadin Antebi, the commissioner of capital markets, insurance and pensions at the treasury, warning about that very eventuality two months ago (that was before the war and no, he didn't have Zilzals in mind).

Antebi said something that should be self-evident: the fact that Israelis' pension savings are all in Israeli investments is irresponsible. The risk inherent in Israel is particularly alive: we could all be killed tomorrow, or wounded in a direct attack on the home front. At least we can protect our pensions, by sending them abroad.

At the end of 2005, Antebi said, only 7.5% of Israel's pension savings (a weighted average in provident funds, life insurance policies and pension funds) was invested overseas. That compares with 11% among American pension funds, and 26% of Europe's pension savings, and those happen to be two geographical areas not in the Zilzal footprint.

The commissioner also noted that in the years 2003 and 2004, the life insurance portfolio was 80% correlated with the Tel Aviv Stock Exchange. The returns of the pension funds were 90% correlated with the local stock market. Which means, every time Israeli stocks decline, for instance because Zilzal missiles blast the heart of Tel Aviv, not only will our physical security be impaired: so will our standard of living in our dotage.

When Antebi wrote that at the end of May, like everybody else, we yawned. Again that commissioner was boring us to tears with his academic analyses of risk diversification, we shrugged.

This week, with Zilzals aiming at Tel Aviv, we returned to his paper and thought to follow his advice. We recalled that Antebi not only wrote a paper - he also forced the insurance companies and pension funds to publish the composition of their investment portfolios on the Internet.

This was a great opportunity, we figured, to check which of our pension managers actually thought of risk diversification and investing some pension money abroad; and which of them still graze only on their own home turf.

So we delved into the websites of the insurance companies in a desperate attempt to find where they'd hidden their portfolio compositions (kudos to Migdal, by the way: it's the only one that actually directs to that composition from its home page). We then dug into the lists we found, and tried to understand them.

We found lots of interesting stuff, and mainly, we found that we couldn't find out how much of our life insurance money is invested abroad.

What sometimes seems to be an overseas investment turns out to be purely Israeli. For instance, "overseas investment" seems to include Teva, and among the "overseas" funds is Poalim Real Estate. And what can appear as a small investment in overseas options can turn out to be a massive exposure amounting to hundreds of millions of dollars.

So: how much of our pension money has been invested abroad? Officially, about 13%, according to Antebi. In practice, the figure is something else, but we can't know what it is as long as the insurance companies, the provident funds and the pension funds conceal the true breakdown of their investments.

Well, I suppose I am a pretty poor patriot. Not only do I insist on worrying about Zilzals, but I insist on worrying about our pensions too, and I have to sincerely doubt that our pension plans properly factor in the true risk of Israel.