Pioneering Israeli Hedge Fund Closes

May 7 2007 | 12:39pm ET

Israel’s first hedge fund has called it quits, burned by the weakness of the U.S. dollar.

The Israeli newspaper Haartez reports that the Livluv Hasigalon was down about 10% in 2007. The highly-volatile fund, while had returned some 50% since its inception in 2002, was heavily invested in dollar-Israeli shekel exchange rates. Last month, Adam Reuter, founder of the firm Financial Immunities and the fund’s portfolio manager, urged the Bank of Israel to buy dollars in an effort to weaken the shekel. His appeal fell on deaf ears.

“Closing Livluv Hasigalon was a joint decision by the partners in the fund, because of its poor performance recently,” Financial Immunities said.

At its peak, Livluv Hasigalon managed 120 million shekels (US$29.7 million) from just 15 investors, and returned 75% in its first two years. It also profited from Israel’s conflict with Lebanon last year, gaining 15% in July, before falling back into the red.

Financial Immunities is not, however, out of the hedge fund business: Its second fund, Hanetz Ha’admonit, a sovereign fixed-income offering, manages 110 million shekels (US$27.3 million) and has returned 35% over the past two years.

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