Middle Eastern hedge funds mean, for most, funds based in the Arab states of the Persian Gulf. But a very different country is now vying for attention in that sphere: Israel.
Israeli fund administrator Tzur Management is attempting to dispel the notion that the tiny Israeli hedge fund industry is purely a local product with what it calls the country's first hedge fund survey. And that survey shows that Israel's hedge funds are more global than one might think.
"Although the perception among many may be that Israeli funds are focused primarily on local markets, in fact, Israeli funds are quite diversified geographically," the survey concludes. "Half of the funds participating in this survey have no direct exposure whatsoever to the markets in Israel," a trend that is growing: Of the 13 hedge funds to launch in Israel since 2009, only two invest in the country.
What's more, according to Tzur, one-third of hedge fund managers based in Israel are from abroad—the U.S., Europe and South Africa—and fully one-quarter attended Ivy League universities in the U.S., much like many of their colleagues from around the world.
"Israel's impressive academic and scientific infrastructure, continuing immigration of highly-skilled professionals and a developed economy with a strong entrepreneurial culture are all fueling the industry's rapid growth," Tzur's Yitz Raab said. "Although in its early stages, it is our belief that, as in the areas of technology and life sciences, the Israeli hedge fund industry will grow to become a recognized center of excellence over the coming decade."
It does, however, have a long way to grow. Tzur estimates that the number of hedge funds in Israel has jumped 162% in the last six years—but there are still only about 60 in the country. And while total assets under management surged 30% last year and 10% in the first quarter, all Israeli hedge funds still manage less than US$2 billion total. And no Israeli hedge fund has launched with more than US$15 million.
According to Tzur, the problem may be the low visibility of the Israeli industry. Just one-third of Israeli hedge fund assets come from abroad—and, unusually, those assets are concentrated in the country's smaller hedge funds.