Charity Is Nice, Now for Returns: World's Jews Betting on Israeli Stocks

'Until now, most of this federation money has been invested in U.S. stocks, foreign stocks, hedge funds and private equity,’ says the founder of New York-based BlueStar Global Investors.

The millions upon millions of Jewish Federation dollars coming into Israel each year have typically targeted one cause: charity. But that may soon be a thing of the past.

In recent months, several high-profile North American federations have invested significant sums of their endowment money in Israeli stocks. And others, having taken note, are poised to follow suit.

For organizations that have traditionally seen their main connection to Israel through the prism of philanthropy, it could be a game changer, says the man who has been holding their hand through this process. This is especially the case considering that the Jewish federations manage close to $15 billion in endowment funds.

“Until now, most of this federation money has been invested in U.S. stocks, foreign stocks, hedge funds and private equity - completely separate from where they give their money, most notably Israel,” Steven Schoenfeld, the founder and chief investor of New York-based BlueStar Global Investors, told Haaretz.

“If they had any investments at all in Israel, it was through Israel Bonds, which are a well-known way of supporting the country,” said Schoenfeld, whose company specializes in the Israeli capital market. “What the federations have come to realize is that not only is putting their money in Israeli equity a good investment, but it’s also good for the Israeli economy and capital markets, and it provides another area of connectivity between the Diaspora and Israel.”

Last June, together with Market Vectors, Schoenfeld’s company launched ISRA, a new Israeli equity fund listed on the New York Stock Exchange that aims to track its BlueStar Israel Global Index, which includes a diverse mix of 93 Israeli companies traded both in Israel and abroad.

To date, four federations or foundations affiliated with federations have invested or committed to invest in the fund: the foundation of the Greater Miami Jewish Federation, the Jewish United Fund of Chicago, the Jewish Federation of Rhode Island, and the Jewish Foundation of Memphis. Together they have pledged $15 million to investments in the fund.

“We’re in discussions now with twice that many federations that are now actively considering allocations to ISRA from their endowments or adding ISRA to the investment options for their donor-advised platform funds,” said Schoenfeld. “We expect significant decisions in the area in the coming weeks and months.” Among those considering adding Israeli stocks to their portfolios was the Jewish Federation of San Francisco, he said.

Schoenfeld was in Israel this week taking part in the annual General Assembly of the Jewish Federations of North America, where he cosponsored a luncheon and discussion on endowment investments with IBI, an Israeli financial services firm.

Steve Gross, the director of endowment management at the Jewish Federations of North America, said representatives of quite of a few of the 153 federations taking part in the General Assembly had attended the luncheon. “I think that many of our endowments would like to have alternatives to directly invest with Israel,” he said. “Our directive here at JFNA is to support our federation endowments and help them learn about these types of alternatives.”

Although BlueStar has been the main catalyst of the push toward Israeli stocks, several hedge funds that specialize in Israeli investments have also approached federation endowment managers, hoping to interest them in acquiring a piece of the startup nation for their portfolios.

In addition to the $15 billion held in endowments by the Jewish federations and affiliated organizations, another $50 billion is held by Jewish family foundations, charities and other organizations, said Schoenfeld. “If even 1 percent of this money can be brought into productive investment in Israel, that would be quite dramatic,” he said.

Amnon Gutman for JFNA