Israel’s Sovereign Wealth Fund Reaches $1 Billion Milestone

Israel’s sovereign wealth fund, which was established to invest the revenues from the country’s natural gas and other resources, has reached $1 billion in assets, according to the Finance Ministry.

The fund, officially known as the Israel Citizens’ Fund, was set up in 2014 and was supposed to start operating in 2018. However, due to political turmoil and a slower-than-expected revenue stream, the fund was delayed for four years. It finally began operating in June 2022, once taxes on profits from natural gas and other resources had passed a required minimum of 1 billion shekels ($273.6 million).

Israel’s Sovereign Wealth Fund Reaches $1 Billion Milestone
Israel’s Sovereign Wealth Fund Reaches $1 Billion Milestone

The fund is aimed at preventing the Israeli shekel from overheating from the sudden expansion in national wealth, as well as saving for future generations and supporting strategic projects. The fund is managed by a professional board appointed by the government, with oversight from the parliament and the state comptroller.

A rapid growth

The fund’s assets have grown rapidly since its inception, reaching $1.01 billion at the end of the second quarter of 2023, up from about $618 million at the end of 2022, the ministry said. The fund is expected to grow to as much as $12 billion in the next decade, according to government projections.

The fund’s main source of income is the taxation of natural gas production, which began in 2013 after Israel discovered huge deposits of natural gas in the east Mediterranean a decade ago. Israel has become a major gas exporter in the region, signing deals with Egypt, Jordan and other countries.

The fund also receives revenues from other natural resources, such as mining and quarrying, as well as from royalties on intellectual property developed with public funding.

A diversified portfolio

The fund invests its assets abroad, following a conservative and diversified strategy. According to the ministry, the fund initially invests 60% of its assets in stocks and most of the remainder in corporate bonds. The fund also allocates a small portion of its portfolio to alternative investments, such as private equity, real estate and infrastructure.

The fund’s performance is benchmarked against a global index composed of 65% stocks and 35% bonds. The fund aims to achieve a long-term annual return of at least 4%, after fees and inflation.

The fund publishes quarterly reports on its activities and results on its website. The fund also adheres to high standards of transparency and accountability, complying with the Santiago Principles, a set of best practices for sovereign wealth funds.

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