ISRAEL Trends and Developments Contributed by: Ronen Vinograd, Vinograd & Co.
The Rise, Fall and Rise Again of Private Evergreen Funds in Israel A brief history – attracting private wealth The Israeli investment buy-side market can broadly be divided between two groups: • Israeli institutional investors (IIIs), which include provident, pension and educational funds, insurers, endowments, and sectorial provident funds; and • family offices (single and multi) and high net worth individuals (HNWIs). Open-end private investment funds investing in non- traded assets (“private evergreen funds” or PEFs) first appeared in Israel in 2014 when IBI Investment House launched the country’s first PEF – the IBI CCF Fund – investing in consumer loans via a US lending platform. At its peak, the fund reached USD800 million in assets under management (AUM). Following IBI’s success, additional players entered the market, each offering PEFs with distinct underlying assets. Examples include: • IBI’s subsequent funds such as the ComReit Fund and the Secured Bridge Loan Fund; • Phoenix Insurance and Harel Insurance, which established their own PEFs; • independent funds such as the Golden Bridge Fund – Israel’s flagship PEF investing in hard money lending in the US with over ILS1.5 billion in AUM. Initially, PEFs were designed to attract private wealth and were highly successful. This success inspired local players to “import” foreign PEFs by setting up open-end feeder funds, allowing Israeli HNWIs to invest in leading global PEFs. Global firms were quick to respond, entering the Israeli market directly or through joint ventures with local partners. While institutional investors were initially hesitant, by 2023 many began to allocate capital to PEFs. Today, locally managed PEFs (including feeders to global funds) hold more than USD10 billion in AUM, primar - ily from HNWIs investing through individual retirement accounts (IRAs).
This development reflects a global trend. Major inter - national players such as Blackstone, KKR, Apollo and StepStone have established PEFs, and Hamilton Lane has joined the ecosystem, promoting its PEF both globally and in Israel. According to PitchBook, global PEF AUM reached USD405 billion in 2024 and is forecast to surpass USD1.1 trillion by 2029. PEF structuring – not just another investment fund Structuring a PEF requires a unique approach. While close-end funds (eg, private equity, venture capital or real estate) totally restrict redemptions and their assets are not valued on a frequent and regular basis, open-end hedge funds rely on the liquidity and trans - parency of traded assets. PEFs, however, are open-end by design but invest in private, non-traded assets. Creating such a vehi - cle requires advanced financial engineering to trans - form illiquid holdings into a structure that provides some degree of liquidity and valuation transparency. It demands interdisciplinary expertise and a deep understanding of asset behaviour under both normal and stressed conditions. Liquidity and valuation mechanisms such as gate pro - visions and suspension clauses must be tailored to the specific asset class. For example, a PEF investing in peer-to-peer (P2P) consumer loans – repaid month - ly over three years on a full amortisation basis – can typically redeem investors at around 10% of AUM per quarter, justifying a quarterly 10% gate. By contrast, a bridge loan PEF investing in two-year loans with bullet principal repayment can only provide liquidity for interest income, leading to a more restrictive 5% quarterly gate. Valuation policies also vary. A P2P PEF must adopt a strict approach to defaults, as there is no collateral, while a bridge loan PEF backed by real estate collat - eral can apply a more flexible methodology reflecting the underlying asset’s value. The rise of PEFs in a zero-interest environment “a rising tide lifts all boats” (John F. Kennedy) The post-2008 era of low interest rates following the subprime crisis, provided fertile ground for PEF growth in Israel. As traditional bank deposits offered minimal
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