Stock markets around the world and in Israel in particular continued last month to show instability. For those seeking to avoid this volatility, one of the main recommendations is to increase exposure to non-tradable investments such as those that are not traded directly on the equity markets. According to a survey conducted by the Israeli startup Valoo, which was conducted among hundreds of accredited investors, with above-average capital, they have already put this recommendation into practice.
According to the survey, 65% of the respondents plan to increase their alternative investments in 2023, and have already started transferring the required capital, while another 7% said they are considering doing so but have not started yet. This is reinforcing a trend that began in 2022 when 32% of those surveyed said they had increased the alternative exposure in their investment portfolios.
Despite this, it seems that these accredited investors are changing the nature of their investments in the alternative field and most of them are significantly reducing their exposure to the drug, to the extent that in the first quarter of 2023 there has been a change in trend compared to previous years.
While in 2022, about 70% of the liquid capital invested directly by large investors for real estate investments, either directly or through funds in Israel and around the world (with an emphasis on the United States), has been used since the beginning of 2023, and has A decline in this trend was observed, and even the demand to sell real estate investments and make them liquid, while the respondents expressed their desire to reduce their real estate investments by about 60%. 68% of the participants decided to actively reduce exposure to the drug, while the rest chose to wait or were unable to reduce investments until the survey date.
When asked why they do not believe that real estate investment will generate income as in previous years, 90% answered that the reason is higher interest rates, the typical cost of utilizing real estate, and the expected slowdown in the market over more than a decade. the next three years.
According to Valoo founder Adi Weitzhandler who founded the company with Meir Steigman, and serves as co-CEO, current alternative investments include privately owned companies, in which the investments allow, directly or indirectly, access to the private market (funds). Plus a basket of corporate investments (equities of global companies with sector spread), sector investment funds by funding stage, and more.
“Those who engage in investments in a professional manner cannot allow themselves to stagnate,” explains Weitzhandler. “The current climate in the global economy, and in the Israeli economy in particular, is a fertile ground for alternative investments to flourish.”
During this period, these investors prefer to invest their savings in the non-tradable market. Because of media reports, including in “Globes” recently, that in the first two months of the year the rate of withdrawal of funds from advanced study funds doubled, and due to the stock market downturn, 52% of investors want advanced study funds and their pension funds to increase exposure to assets non-marketable funds, in particular venture capital funds, with the aim of reducing dependence on markets.
“Globes” found that most pension funds are already deeply in this direction. While in March 2022 the average exposure of companies managing new funds from non-tradable assets was 44.2%, by February 2023 the percentage had increased to 47%. The Altchuler Shaham pension fund was particularly notable as its investment ratio jumped from 34.6% a year ago to nearly 45% in February.
In the tradable market – preference for Wall Street indices
If in spite of all this accredited Israeli investors invest in stock markets, they prefer to invest in indices. When asked which stocks are their favorite to buy, most investors respond that the tendency is to buy indices, primarily the S&P and Nasdaq on Wall Street, rather than individual stocks, no matter how popular they are. 61% of respondents expect returns of between 10% and 20% on these indexes in 2023, while 28% expect returns of less than 10%, and 11% expect returns above 20%.
Regarding the Nasdaq, the survey found a cautious return to the technology-dominated index. Nearly a third of investors have already started returning money to the US stock market at the beginning of the year, and they expect a moderate recovery to continue through 2023 in all bond sectors. 42% answered that they would prefer to wait and see the performance of the Nasdaq index in the next month, and only then make a decision to return and invest.
The “vanguard force” that investors follow
Valoo is an investment platform that mediates between accredited investors (many of whom are famous angels in the Israeli tech industry) and privately owned global technology companies and those who hold shares in them and are looking to sell. The company has a community of over 1,000 major Israeli investors and among the companies to invest in via Valoo are Verbit, Via, eToro and in the past also Payoneer ahead of an IPO. In order to be included in the company’s platform, the company must present revenues of more than $ 100 million, so only stable companies are included.
Weitzhandler explains, “We naturally talk about savvy investors who see trends and value in every market they invest in and are usually the first to implement changes. We often see accredited investors as the ‘avant-garde force’ that other investors follow.” In this context, trends are Emerging from the survey and in-depth discussions with the investors surveyed are less “the wisdom of the crowd” and more “the wisdom of the professionals.”
Since the survey was conducted among hundreds of Israeli investors who have a combined capital of about $1 billion, it is interesting to know what they think of the local economy and currency. The results are unequivocal: Exit from the Israeli stock exchange with no possibility of returning to it. 92% reported that among the investment portfolio they manage there are no direct investments in shares traded on the Tel Aviv Stock Exchange (TASE), compared to only 8% who own shares here. Most of them said that their investments in the Israeli Stock Exchange are only made by their financial managers, such as financial planners who use their pension funds and long-term savings.
It is not surprising that the recent weakness of the shekel, which is mainly attributed to the government’s planned judicial reform, which led to public protests and the reaction of international rating agencies, has left its mark. Thus, 78% of the investors prefer to make their next investment in dollar-linked assets and only 22% will make their investment in shekel.
“Many accredited investors in the Valoo investor community convert their shekel investments into dollars and are generally less willing to invest in the Israeli market,” says Weitzhandler.
“Even in the past, there was no excessive enthusiasm for the Israeli stock market, but in recent months, and in light of the warning signs that continue in the recession of the Israeli economy, quite a few investors are looking for diversification into other investments, and it is not of great importance to invest in an option.” Close to home.
Published by Globes, Israel business news – en.globes.co.il – on May 2, 2023.
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