Implications for investment of a changing world

In the future, investing will not just be a matter of sticking to some stock index or other, i.e. a “fire and forget” approach; It will be necessary to actively participate and identify trends. This is the assessment of Anath Levin, Chairman of BlackRock Israel and one of the most prominent figures in the Israeli financial world. Levin participated in a panel discussion at Globes’ Israel Business Conference, moderated by Globes Capital Markets Editor Shai Shalev. The panel also included Liat Hazot, CEO of Hapoalim Equities and Hapoalim Bank, and Limor Becker, managing director of investment house Hamilton Lane in Israel.

We are at the end of an amazing year for investors. The Tel Aviv 35 Index rose by 21%, and other leading stock indices also rose. The price of Bitcoin has also jumped by 112% since the beginning of the year. Is it time to exit or wait for the next downturn?

Levin: “You have to zoom out. When you look at the long term and look outward, something has happened here from Covid until now. We are in a world where consumption means inflation. Governments will pay more on their debt. We also need to think What future growth will look like, because the world is getting older.

“We need to look at the structural trends that the world is going through, because this is a very important transition. Aging populations and the demographic transition are not only changing economies, they are also changing the political landscape.”

“The real world is getting closer to the financial world,” Levin added. “That’s why we at BlackRock are pro-risk. When you look at the United States today, the consumer is strong, and high interest rates have not caused a crisis.” Companies are strong and their profits are strong. In Europe, the matter is different, as investors have to look closely at debt, because of the structure. If you try to understand what all the changes mean when looking to the future, you will not know what the next industry will win in the field of artificial intelligence, and it must be in the markets. Now to follow it. “

“We have the privilege of not trying to time the market,” notes Limor Baker of Hamilton Lane, an investment house that specializes in private equity. “We are the largest private markets asset allocator in the world; it all creates a database for us.” Over the past 20 years, private markets have outperformed tradable markets. Markets were not always at these record levels. It is interesting to look at the period of the dot-com bubble in 2000 and the financial crisis of 2008. During those periods, private investment markets showed stability.

Liat Hazot of Hapoalim Equities stated, “As a long-term investor, I have learned not to time the market. On the other hand, you have to look at the trends and choose correctly from the micro. It is true that we are in a kind of peak of growth, but it is not certain that this is the Peak (last). All the fundamentals that Anath mentioned create opportunities. There are many new sectors that will evolve from the trends we are seeing now, and they will continue to grow creating more and more opportunities.

Where can you identify the biggest opportunities in the market? What are the upcoming trends?

Levin: “BlackRock is the largest investment manager in the world. ($11 trillion in assets under management.) We have the privilege of bringing together the tradable world and the non-tradable world. We know how to look at those two worlds and see what feeds them and looking at the opportunities ahead, We have to look at the megatrends: geopolitics, aging populations, artificial intelligence requiring a massive amount of data centers and power, net zero carbon emissions, and the future of finance are converging in the infrastructure space.

“It is the infrastructure field that knows how to deal with the recurring uncertainty about future inflation. Today, inflation in the world is higher and partly flat. We have growth that is likely to be lower. That is why infrastructure will shift to the private sector.” Market (On government investment. HS). So, whether it’s private investments or more marketable investments, infrastructure is important for both,” Levin explains.

Baker: “There is a major trend of money being transferred from the public sector to private markets. 90% of the companies in the world are private companies, while only 10% of the capital raised is private. So, 10% of the money raised is corporate.” especially”. This area is the entry point for private investors into the private market sector, and was previously the domain of institutions, with high minimum investment and other barriers. This area has been closed but is open today during the private investment funds around the world are exposed to the best investments today, and Israel was a little behind in 2005, institutional investors were not exposed to the private markets, but today they have entities like us that do everything to facilitate access to these areas. In Israel.

Hazot: “I estimate that after the stabilization of northern Israel, there will be a great deal of physical rehabilitation here. The whole infrastructure issue, which Anath touched on, and many of the residential real estate plans that have already been implemented. We have had a shortage for many years in this area, Supply has failed to meet demand, so we think there will be tremendous growth, which is why residential real estate is a very interesting area when interest rates fall and income-generating real estate will also benefit of course, the defense industries, of which the war was a model, the world was It all looks at technology and our systems “It is true that prices in this world are already high, but once there are arrangement agreements and foreign investors return in large numbers we will see these sectors boom as well.”

Portfolio management in a new world

Are there high-risk sectors that are overvalued? The value of Bitcoin has more than doubled.

Levin: “It is estimated that $75 trillion will be invested worldwide in infrastructure by 2030. Urbanization will also be a leading trend. What is needed is an understanding of how to manage an investment portfolio. Specific questions – This rose, which jumped – evades the question: How Managing an investment portfolio In the new post-pandemic world, a world with new order and structural changes, we know that the old 60/40 split (60% bonds, 40% stocks) will no longer exist as a portfolio Neutral in the future, because long-term bonds can no longer protect against falling stocks, and governments around the world are raising a lot of money today, and there is a great risk “at the long end of the bond curve” (that they will have difficulty repaying debt,). HS) That is why we need to be more selective in choosing between sectors.

“Between 2016 and 2019, if you moved your portfolio between sectors, you got another 30%. And in the last three years, if you moved between sectors, the return almost doubled. Today, investors are getting closer to the real world. They have to think very carefully about The scenarios that lie ahead, artificial intelligence will change many industries, and many things, some of which we do not know today.

Baker: “The flow into the S&P 500 began in 2023. More than NIS 200 billion from Israel have been invested in the index over the past two years. They have recorded tremendous returns. But we must remember that this index has not always been at record levels and there have been Periods of stagnation and decline. In 2010, for example, the index did not move and in 2022, it fell by 20%. I remembered that the Israelis make investments in dollars, and that you need… To diversify between many sectors and fields, switching to investing in the S&P 500 index only is very dangerous.

“There is a huge gap between the opportunities and investment channels available to the private investor in the United States and Europe, compared to those available to the Israeli investor. Hamilton Lane in Israel is working to reduce this intolerable gap, by introducing investment tools and opening up options previously not available to the investor community in Israel – Primarily, private market investments and within these funds are evergreen.”

Levin: “We have to ask, what is passive investing anyway? Today in the United States there are active passive investments. Passive and active are old names. Passive means that there is supposed to be a product that is constantly traded on the stock exchange and you can always follow it in The past, people followed a certain index, and the new passive is activated and selects companies, for example, from the Momentum index, and now you can follow them, and you must also be active in choosing the sectors and companies in which we invest.

“There is a drama in bonds. As we mentioned, governments will have to raise a lot of money, and they are constantly offering an alternative to very high interest rates for investors. Specifically, for tradable debt (corporate bonds), there are tight spreads (competition for bonds) Interest).Combining and understanding how the markets react is the right way to go, you can’t “set and forget” anymore, you can’t just sit on one indicator.

How did the war affect the desire of investors to return and invest here?

Hazot: “I basically see exits for the Israeli money that we invest in. Certainly when there is a settlement in the north, which we hope will continue, and hopefully there will be a settlement in the south as well, then we will see investors returning to Israel. We saw in the Phoenix stock distribution that A quarter of the buyers were foreign investors and there were several other exits this year and foreign investors see us as a technology hub, and they talk about Israeli talent, and they are right about that, as far as they are concerned that The geopolitical situation calms down, we will see them returning to the technology sectors, and the defense sector will also be very interesting for them.

Baker: “We have invested more than a billion dollars in Israeli companies, in companies located on the Gaza and Galilee borders and in Israeli high technology. The CEO of Hamilton Lane has visited Israel four times since the war began. We are here in times of peace and in times of war, the system “The high-tech environment is strong – even stronger in wartime. We believe that the Israeli defense industries are strong, as well as high-tech and technology, which are the fastest growing sectors. The end of the war – I hope that will happen soon, and it will give a huge boost to Israel’s economy, and there will also be many exits.”

Levin: “We are here to stay.”

The Globes Business Conference in Israel is held in cooperation with Bank Hapoalim and Phoenix Holdings, and is sponsored by El Al, Bezeq, Nespresso, Walt, Dell, the Israel Medical Association, Energean, the Jewish National Fund, BlackRock, Playtica, Meta, Strauss Group, Bazin Group, Inc. MSCI, with the participation of Mekorot, the Port of Ashdod, and the Israel Innovation Authority.

Published by Globes, Israel Business News – en.globes.co.il – on December 9, 2024.

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