World's biggest fund discovers Tel Aviv

Amiram Barkat

World's biggest fund discovers Tel Aviv

Last year, Rami Levy joined BTI, the group of businesspeople that supports peace with the Palestinians for the sake of the economy. When this step raised some eyebrows, Levy, a dyed in the wool Likudnik, stressed that his political position was still far from that of those who support the Oslo process. But in Oslo, it turns out, there has actually been a move in Levy's direction recently, or, to be more precise, in the direction of Rami Levy Chain Stores Hashikma Marketing 2006 Ltd. (TASE:RMLI).

This stock is one of five Israeli stocks that in 2013 became part of the of the investment portfolio of the Government Pension Fund of Norway, the largest sovereign wealth fund in the world. At the end of 2013, the fund held shares in Rami Levy Chain Stores worth NIS 18 million, out of total holdings of NIS 3.5 billion in 62 stocks traded on the Tel Aviv Stock Exchange.

Was the decision to invest in Ramy Levy Chain Stores politically motivated? Unlikely. But in other instances of investment in Israeli companies, the fund has certainly acted out of avowedly non-economic considerations. So, for example, in January this year the fund announced that it was putting Africa-Israel Investments Ltd.(TASE:AFIL), controlled by Lev Leviev, and its subsidiary Danya Cebus, back on its blacklist.

This step was taken on the recommendation of the fund's ethics committee, which determined last November that the two companies were guilty of contributing to severe breaches of human rights through construction in East Jerusalem. As a result of this decision, the fund will sell off its holdings in Africa-Israel, which were worth NIS 7.3 million.

Another loser is communications equipment producer Mellanox Technologies Ltd. (Nasdaq:MLNX). During 2103, the Norwegian fund liquidated its holding in the company, which only a year previously amounted to some NIS 60 million. Its holding in Emblaze Ltd. (LSE:BLZ) was also liquidated last year. Similar things have happened in the more distant past. In September 2009, for example, the fund decided to sell its holdings in defense manufacturer Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT) because it provided equipment for the separation fence.

Wary of the gas partnerships

These instances are perhaps discordant to Israeli ears, but the general picture of the Norwegian fund's activity is actually positive from an Israeli point of view. In the course of 2013, the value of its investment in companies traded on the Tel Aviv Stock Exchange rose by 43% in nominal terms, from NIS 2.4 billion to nearly NIS 3.5 billion. Even discounting the boom on the stock exchange, the rise is impressive: the fund's proportionate holding in shares on the Tel Aviv 100 list grew by 21% last year, exceeding 0.5% of the total of shares listed.

At the same time, the fund raised it holdings of Israel government bonds from NIS 2.674 billion to NIS 3.75 billion. Another NIS 693 million of the fund's money is invested in Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). The fund's total investment in the Israeli capital market is thus nearly NIS 8 billion.

The fund's largest equity holdings are in Teva, the banks, and Israel Chemicals Ltd. (TASE: ICL), with the best performing stock being Bank Hapoalim (TASE: POLI). Apart from Rami Levy, it is noteworthy that the fund has added to its portfolio two gas exploration companies,Delek Energy Systems Ltd. (TASE: DLEN) and JOEL Jerusalem Oil Exploration Ltd. (TASE: JOEL). In both cases, the investment is in the parent company, and not in the partnerships they control, Delek-Drilling, Avner Oil and Gas LP (TASE: AVNR.L), and Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), which could indicate aversion in principle to investment in limited partnerships.

What lies behind the growth in the fund's investment in Israeli stocks? Journalist Anders Horntvedt of financial newspaper "Finansavisen" points in this context to the decision by the Norwegian Ministry of Finance in the summer of 2012 to include Israel in its emerging markets index. "Beyond that, it is no secret that the current government in Norway holds more positive views on Israel than the previous government, and that certainly can't harm," Horntvedt adds.

Indeed, on October 16, 2013, a new government was sworn in in Oslo headed by a center-right party, replacing a coalition of left-wing parties that took an openly pro-Palestinian stance. Since then, the new Norwegian prime minister, Erna Solberg, has declared her opposition to boycotting Israel.

Aharon (Orni) Izakson, who heads the Norwegian-Israeli Chamber of Commerce, can testify to the warming of relations between the two countries. Izakson points to growing interest on the part of Norwegian companies in Israel's oil and gas exploration industry, and mentions an Israel-Norway business conference planned for November in Israel. "I hope that it will also be possible to promote the signing of an R&D agreement between the countries," he says.

Will we see more Norwegian money invested in Israeli know-how?

"I hope and believe that we will, although in my view it would be better to develop relations on a mutual basis, of investment by both sides."

According to Horntvedt, the Government Pension Fund of Norway will continue to increase its investment in Israel and to reduce its under-exposure to the Israeli market. "The fund is growing rapidly, and so there is every reason to assume that its investments in Israel will continue to grow," he says. "There is nothing at present to prevent the fund from investing in Israel, apart from matters relating to the settlements."

Do you think the ban on Africa-Israel will be broadened to other companies?

"Any company that has activity in East Jerusalem or in settlements on the West Bank runs the risk of being put on the blacklist. Like it or not, that is the fund's declared policy."

Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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Israel: start-up notions

Start-up notionsThe real roots of Israel's economic miracle The 1990s were a revolutionary time Israel's economic development. The government created Yozma, the innovative venture capital vehicle structured by the Israeli government, saw an inrush of venture capital, a wave of NASDAQ IPOs, and benefited from a surge in corporate technology acquisitions. Recent accounts represent the period as a case study for governments looking to foster entrepreneurship. But that story is so incomplete as to mislead policy makers. In fact, developments in the 1990s were the fruits of a process almost forty years old.The real timeline:1. 1950s. The seeds of Israel’s entrepreneurial revolution were sown in the late 1940s and 1950s. Israel’s first (Weizmann) and fourth (Katzir) presidents were scientists. Both believed strongly in the role of science in national defense and societal prosperity; in and of itself unique in the world and a strong message about national priorities. The first military technology transfers took place then, half a century before Mirabilis created ICQ, the first instant messaging system.2. 1960s. R&D got a huge boost in the 1960s, in part from the sudden 1967 French weapons embargo: military self-reliance became defense policy, leading to massive investments in military R&D and the seeding of what would become an entrepreneurial hothouse, the Intelligence Signal Corp (Unit 8200). In 1968 the Katchalski Committee recommended the establishment of the Office of the Chief Scientist (OCS) to help fix market failures in commercializing R&D.3. 1970s. The early 1970s saw Israel’s first NASDAQ IPO (1972; by medical imaging pioneer, Elscint), the embryonic involvement of top-tier US-based venture capital, and very significantly, the establishment in Israel in 1974 of Intel’s first international R&D center. In 1977 the influential BIRD foundation was created to fund technology-based product development between Israeli and US companies.4. 1980s. By the early 1980s there were numerous top-tier VC investments, and by 1984 the NASDAQ value of the first wave of a dozen Israeli tech ventures was $780 million. In 1984 the government passed the milestone Law for the Encouragement of R&D. In 1985 the first limited partnership venture capital fund, Athena Venture Partners, was established with $23 million. In 1987 the cancellation of the Lavi fighter-plane mega-project flooded the market with thousands of engineers who swelled the ranks of startups. By 1989 I even had enough material for my speech in Berlin at the European Venture Capital Association conference, “The History of Israeli’ Technological Entrepreneurship.”You can’t write American history without Jefferson and Washington, yet the authors of Start-Up Nation tried to do the equivalent, overlooking founding fathers like Uzia Galil and Dan Tolkowsky. They’ve even neglected the founding sons—people like Zohar Zisapel (founder of 29 IT firms) and Efi Arazi (founder of Scitex). There are consequences to this revisionism. For example, by focusing on the 90s, policymakers have neglected the parallel entrepreneurship ecosystem that preceded—and enabled—initiatives like Yozma.But it was this ecosystem that, by 1990, made Israel’s entrepreneurial revolution a fait accompli; so much so that by 1997 there had been 68 NASDAQ IPOs—all before Yozma’s investments started bearing fruit.And in truth the massive Russian immigration of scientists and engineers has had little direct impact on Israel’s entrepreneurial revolution—in the 90s most had no choice but to accept K-12 teaching or low-level service jobs; Israel’s vast incubator program, admirably privatized, has bred a relatively low number of successful ventures; and Israel’s culture and institutions were anti-entrepreneurial until the mid-1990s, with labor and the government owning huge portions of the economy, wealth being scorned, and marginal tax rates discouraging extra work.Israel’s entrepreneurial accomplishments have indeed been nothing short of miraculous. Since 1972, over 160 Israeli ventures have been listed on NASDAQ, more than any other country outside of the U.S. and Canada, and hundreds of tech ventures have been acquired. Tens, if not hundreds, of billions of dollars of value have been created. The world benefits from Israeli innovations, such as the USB memory stick, instant messaging and new generation cardiac stents, to name a few. The entrepreneurs who created such novel products have disproportionately contributed to Israel’s growth. So it is only natural for policy makers around the world to want to learn from Israel’s remarkable experience. But they will only reach the right conclusions if they first get the history right.

TAU team takes part in discovering new planet

A team of astronomers at TAU and the Harvard-Smithsonian Center for Astrophysics have announced the first-ever discovery of an extrasolar planet via induced relativistic beaming of light from the host star.For the past two years, Professor Tsevi Mazeh and his PhD student, Simchon Faigler, from the School of Physics and Astronomy at TAU, have been searching for planets around other stars using a novel detection method. Their technique is based on identifying three very small effects that occur simultaneously as a planet orbits a star. The first effect is Einstein's relativistic "beaming" effect that causes a star to brighten and dim as it is tugged back and forth by an orbiting planet. Detection of planets via the beaming effect was predicted in 2003 by Prof. Avi Loeb, Harvard University and Sackler Professor by Special Appointment at Tel Aviv University, and Prof. Scott Gaudi (now at Ohio State University).The second effect that the Faigler-Mazeh method looks for is the stretching of a star into a football shape by the gravitational tides raised by an orbiting planet. Such distorted star appears brighter when observed from the side, due to the larger visible surface area, and fainter when viewed end-on. The third small effect is due to starlight reflected by the planet itself.Because the brightness variations are extremely small (on the order of one part in ten-thousand), these effects can be detected only with accurate data obtained by space missions. The Tel Aviv team, which is supported by a European Research Council Advanced Grant, analyzed data for more than one hundred thousand stars obtained with the NASA space mission Kepler, looking for the beaming and the two other modulations. After discovering a planet candidate, they collaborate with Dr. David Latham from the CfA and his team, which includes Dr. Lars Buchhave, to observe the candidate from the ground for additional spectroscopic confirmation.On May 3rd 2012 Faigler and Mazeh noticed the three effects in one of the stars observed by Kepler. Ground-based observations to confirm the planet detection were performed by Latham and his team at the Whipple Observatory in Arizona, and by Lev Tal-Or, another PhD student from Tel Aviv, at the Haute-Provence Observatory in France. Both telescopes confirmed unequivocally the existence of the planet, now called Kepler-76b.Last week, Faigler, Tal-Or, Mazeh, Latham and Buchhave, announced the discovery in a paper to be published in the Astrophysical Journal.Kepler-76b is in the constellation Cygnus at a distance of about 2000 light years. The planet, with a mass of twice the mass of Jupiter, orbits its parent star very closely, with a period of one and a half days. The proximity of the star probably causes the planet to be tidally locked, so that the same side of the planet faces the star at all times. That part of the planet is heated by stellar radiation to a temperature of about 3500 degrees F.While examining carefully the stellar brightness, the team found strong evidence that the heat absorbed by the planetary atmosphere is carried around the planet by jet stream winds for about 10,000 miles, a substantial fraction of the planetary circumference. Such an effect has been observed before only in the infrared with NASA’s Spitzer Space Telescope. This is the first time a wind effect has been observed in the optical band. The study of such a jet is extremely important for understanding how the planetary atmosphere responds to intense stellar heating.All of the planets found so far by the NASA Kepler mission were discovered because they transit (eclipse) their parent stars. What is special about the TAU new technique is that it can find even non-transiting planets. "The irony is that Kepler-76b is in fact transiting the edge of its parent star,” says Faigler. “This is why originally it was misclassified as an eclipsing binary. Only through detection of the three small effects were we able to determine that it is actually a planet.""This is the first time that this aspect of Einstein's Theory of Relativity has been used to discover a planet", says Professor Mazeh, who is a participating scientist in the NASA Kepler mission. "We have been searching for this elusive effect for more than two years, and we finally found a planet! It is amazing that already a decade ago Loeb and Gaudi foresaw this happening. Shay Zucker of TAU, a former student of mine, called my attention to this prediction. At first, I did not believe it is possible, but I slowly got into it. Luckily, we got the support of the European Research Council to carry this project forward, and we collaborated with Dave Latham who believed in this project and kept following the false candidates that Simchon and I were giving him. In the end we found Kepler-76b! It is a dream come true.""The discovery proves the feasibility of the method," says Faigler. "We hope to find more planets like Kepler-76b using the same technique. This is possible only because of the exquisite data NASA is collecting with the Kepler spacecraft for more than 150,000 stars."

Israel-International Agreements

International Agreements Following is a list of several economic international agreements Israel is signed on, divided by type of agreement.Note: This page contains only major economic agreements related to or under the supervision of the Ministry of Finance.Avoidance of Double Taxation Agreements (Soon)Bilateral Investment Treaties (BIT)Financial Protocols (Soon)Free Trade Area (FTA) Agreements and Qualified Industrial Zones (QIZ) AgreementsFunds for Cooperation in Industrial R&D AgreementsBilateral Investment Treaties (BIT) Israel provides a legal framework for protecting Israeli private overseas investments through a global network of Bilateral Treaties for the Reciprocal Promotion and Protection of Foreign Investments which express the signatories' commitment to the promotion of bilateral investment.Read MoreInvestment Agreements are intended to protect and encourage investment by reducing political risks associated with the investment climate in foreign markets. The agreement guarantees the repatriation of both initial investment and returns in case of nationalizations, expropriations, and damages resulting from armed conflict, and provides foreign investors with treatment equitable to that received by local, and third party, investors. Furthermore, the agreement assures the free transferability of investment related funds convertible at market exchange rates. The agreements' significance stems from the arbitration clause which commits national governments to unconditional international arbitration in case of disputes with private investors. Disputes are to be brought before ICSID- the International Centre for Settlement of Investment Disputes, an organization dedicated to the resolution of legal disputes, operating as part of the World Bank Group.ICSIDIsrael's BIT Background Israel's strategy of globalization and liberalization led to a process of specialization and increased efficiency in which uncompetitive industries were relocated to emerging markets, allowing the economy to focus on its core sectors. Furthermore, Foreign Exchange liberalization enabled Israeli enterprises to invest in, and establish subsidiaries abroad, in both the manufacturing and services sectors. These reforms, implemented in the 1990's and early 2000's, including liberalization, deregulation and global integration, increased the Israeli economy's growth rate, consequentially, causing a substantial increase in the stock of Israeli outward investment. Israel views its Bilateral Investment Protection Agreements, along with its Double Taxation and Free Trade Agreements, as a prime tool for the achievement of economic growth via integration with global real and financial markets.Israel negotiates Bilateral Investment Treaties on the basis of a model text from 2003 which replaced the model text from 1994. For further information: Model BIT Text 2003New developments in the 2003 Model BIT Text Overview of Bilateral Investment TreatiesFor additional information, please contact: Mr. Ilan SosnitskyDirectorBilateral DivisionInternational Affairs DepartmentMinistry of FinanceIsraelilans@mof.gov.ilAgreements: AlbaniaArgentinaArmeniaAzerbaijanBelarusBulgariaAmending ProtocolChina, People's Republic ofCroatiaTreaty in force, negotiations for amendment, resulting from Croatia's ascension to the E.U. are underway.CyprusCzech Republic El Salvador Estonia Ethiopia Georgia Germany Guatemala Hungary Treaty terminated on June 26, 2007; existing investments are protected for ten years after termination.India KazakhstanKorea, Republic of Latvia Lithuania Macedonia, FYRUnder negotiationMoldova Mongolia Montenegro PeruUnder negotiationPoland RomaniaAmending ProtocolSerbia Slovakia SloveniaTreaty terminated on June 26, 2007; existing investments are protected for ten years after termination.South AfricaPending ratification by South Africa, Israel ratified agreement on March 30, 2009.Thailand Turkey Turkmenistan UkraineNew treaty signed on November 24, 2010, ratification pending.Uruguay UzbekistanVietnamUnder negotiation

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