A small country, founded just 60 years ago, Israel packs a wallop when it comes to innovation in science and technology. “A few weeks ago, an economist called Israel ‘the land of milk and startups,’” says Zvi Chalamish, CFO of the Israel Economic Mission, enjoying the riff on the country’s biblical reputation as “the land of milk and honey.” In fact, outside of the Silicon Valley, Israel has the highest concentration of high-tech companies in the world, with over 4,000 in a country that’s almost as big as New Jersey.
Chalamish will speak about “Israel’s Financial Market: A Unique Opportunity for Investors,” on Thursday, September 18, at 6 p.m. at the Nassau Inn. The event is sponsored by the United Jewish Federation of Princeton Mercer Bucks . Also speaking are David Anthony, managing partner of 21 Ventures, and Cliff Goldstein, president of Amidex 35. For information, call 609-633-8600 or e-mail firstname.lastname@example.org.
Israeli has a lot going for it as a venue for investment, according to Chalamish. The country’s economy grew by 5.4 percent the first quarter of this year, following four years of similar growth. The first quarter also saw Israeli exports up 12 percent. The shekel is strong against the Euro and the dollar, and there is a surplus in its account.
Furthermore, Israel’s bond ratings have been upgraded in the last few months by Moody’s, Standard and Poor’s, and Fitch. “This is important for investors,” says Chalamish. “When they know this is our rating, they can be more confident of their investments in everything in Israel.”
Finally, continues Chalamish, Israel’s gross domestic product, which at its founding in 1948 was less than $1,000 per capita, is today more than $22,000. “Despite the global slowdown, our economy has shown impressive growth,” says Chalamish.
Although Chalamish also admits that “the Middle East is not the best area in world,” he doesn’t see any risk for the existence of the Israel and he cites excellent security in Tel Aviv and all business areas. “It is safer than many places in the world,” he says. “You can go out in the middle of the night without being afraid of violence.”
Even military tangles with its neighbors have not stopped Israel’s economic growth, says Chalamish. “Despite the war in Lebanon in 2006, the economy grew more than five percent.” And the war did not stop foreign investment. “Some of the deals signed up during the war appreciated our ability to continue to grow, although we live in the Middle East,” he says.
Although Chalamish does not recommend specific investments, he suggests a number of ways for businesses, pension funds, and individuals to earn good returns:
Invest in an exchange-traded fund. On May 27 the New York Stock Exchange launched an exchange-traded fund, Northern Trust’s Northern Exchange Traded Shares TA-25 Index Fund (TAV), which is designed to track the 25 largest shares traded on the Tel Aviv Stock Exchange. “If you don’t want to convert dollars to shekels,” says Chalamish, “you can buy it with American dollars.”
Buy shares of Israeli companies that trade on Nasdaq. With the second highest number of companies on the exchange following the United States, Israel includes among its 70 companies Teva Pharmaceuticals, the largest generic drug company in the world; Converse, developer of voice mail; Check Point, creator of the firewall industry; and Given Imaging, inventor of a camera in a pill tha, films the gastrointestinal tract and transmits images to a computer.
Invest through private equity or venture capital. Seek funds that invest in companies in Israel.
Invest directly in Israel. In 2006 foreign investment in Israel, either in the Israeli stock market or in individual companies, was particularly high, at $25 billion, because of three large investments. But even in 2007 investments reached more than $13 billion.
This summer, says Chalamish, a large American pension fund made its first investment outside of the United States by buying part of an Israeli company, and the New York State pension fund has invested more than $1 billion in Israel over the years.
Chalamish notes that Warren Buffet recently invested $4 billion in ISCAR, which produces tools for industry using sophisticated technology, and that SanDisk bought msystems, an innovator in flash storage, for $1.5 billion. On the website of the Israel Economic Mission (www.israeleconomicmission.com) is a list of Israeli companies looking for partners in the United States.
Chalamish suggests working with an asset manager in the United States or Israel to help choose among companies that have developed products in the environmental, technological, and medical spheres. Among the few hundred companies on the Israel stock exchange are Netafim, which leads the world market in water drip irrigation; and IDE Technologies, which specializes in research and development of saline water desalination processes. Israel is also involved in a project to build electric cars. To build infrastructure and institute planning for green and water technologies, Israel is looking for up-front investment, with the help of conferences this winter.
Chalamish was born in Jerusalem, where his father worked in Israel’s tax office — “the Israeli IRS,” says Chalamish — and his mother was a secretary at the “Jerusalem Post” newspaper. Chalamish received a bachelor’s in economics and accounting in 1993 and an MBA in finance and accounting in 1995, both from the Hebrew University in Jerusalem. He also was a captain in the Israel Defense Forces.
Three years ago he was appointed to his present position, where he is responsible for raising foreign currency for Israel in international markets through bond and loan guarantee offerings. He oversees bond activities and fundraising initiatives worldwide, is the key liaison to the American investment banking community and financial institutions, and is in charge of the budget for the Israel Economic Mission and its seven regional offices in North and South America.
As the North American representative of the ministry, Chalamish raises most of Israel’s foreign debt, both through the Israel Bonds organization (in existence since 1952 and until 1990 Israel’s main source of foreign currency) and by issuing bonds in the market for institutional funds, asset managers, and big buyers. With a goal of raising $2 billion a year, half comes through Israel Bonds and half through market bonds.
Chalamish’s office also manages Israel’s foreign debt, receiving money, paying interest and principal, and paying investors and meeting with them at least once a year. The market bonds have been quite desirable. “At the end of 2006 we issued $1 billion and the demand was $5.5 billion dollars on our road show,” he observes.
“I think Israel is a great opportunity to invest in new ideas,” says Chalamish. “We have more ideas than big companies.”