Founder & CEO
Founder & Managing Partner
Managing Partner
Managing Partner
The Pengana Alpha Israel Fund invests in listed Israeli companies that produce cutting edge – both high and low tech – technologies. These Israeli listed companies have developed solid intellectual property coupled with strong global distribution.
The Fund offers Australian investors diversification within global equity exposure to a unique and promising market that is very much skewed to industries and technologies that are either limited, or do not exist, in the Australian market place, such as: the semiconductor industry, solar and water treatment technology, aerospace and electronic defence industries, and cyber security technologies.
i.Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Performance figures are calculated using net asset values after all fees and expenses, and assume reinvestment of distributions. Index returns shown are in ILS (Israeli Shekel). No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance and may not be repeated, the value of investments can go up and down.
^. Inception 1st January 2018.
* Performance for periods greater than 12 months are annualised. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
1. Inception date 1 January 2018. Performance shown is the continuous performance of both the current and previous strategies.
2. Prior to February 2025 performance has been simulated by Pengana from the monthly gross returns of the Alpha Long Equities Fund denominated in ILS. The simulation was done by: hedging currency exposure of the underlying strategy to the base currency of the stated class using three month forward rates; and, applying the fee structure of the stated class. From February 2025 inclusive, performance is of the Pengana Alpha Israel Fund.
3. Index returns shown are in ILS (Israeli Shekel).
Please note: This fund is only open to Wholesale Investors.
COMMENTARY
Market review
The Israeli capital market sustained its positive momentum throughout July, mirroring the upward trend in global equity markets. Internationally, investor attention remained centred on President Trump’s proposed tariff policies. Domestically, focus shifted to geopolitical developments, particularly the negotiations surrounding a potential hostage deal. As prospects for an agreement waned toward the end of the month, local market gains began to recede.
Another key influence on the Israeli market was the evolving outlook for interest rate reductions. Expectations for aggressive rate cuts moderated due to cautious commentary from the Governor of the Bank of Israel and persistently high inflation figures.
Our medium-term base-case scenario remains unchanged: cessation of hostilities, interest rate reductions, a substantial increase in domestic investment, and normalisation agreements with neighbouring countries.
As we enter August, a month typically marked by reduced liquidity and the release of second-quarter earnings reports, we anticipate increased market volatility. Accordingly, we are prioritising risk management and positioning the portfolio for maximum flexibility, with a strong emphasis on diversification and liquidity.
Portfolio commentary
We made a slight reduction in overall exposure compared to June, primarily by trimming our positions in the semiconductor and insurance sectors. Both sectors have experienced significant year-to-date gains, presenting an opportunity for modest profit-taking.
Semiconductors and Financials remained our leading sectors. Top contributors included Camtek (+15%), Qualitau (+11%), Clal Insurance (+20%), Phoenix Insurance (+10%), while detractors included Nayax (−11%) and ICL (−8%).
Nayax announced a 6% reduction in workforce, which the market interpreted as a signal of business deceleration and potentially weak second-quarter results. However, we view this move as a strategic adjustment following an aggressive acquisition strategy and a near tripling of headcount since its 2021 IPO. We expect the Q2 2025 results to show projected revenue growth of 30%, driven by a 23% increase in customer base.
The 15% U.S. tariff on Israeli goods may negatively impact exports. However, relative to global standards, this rate is on the lower end, potentially enhancing Israel’s competitive positioning. Bank of Israel data suggests a possible economic contraction in Q2, largely due to the conflict with Iran.
Macroeconomic Developments
Consumer credit card spending declined by 9.4% month-over-month in June and 3.5% quarter-over-quarter. Encouragingly, July data indicates a strong rebound in private consumption, with a 13% year-over-year increase in credit card purchases.
The July Consumer Price Index (CPI) is forecasted at approximately 0.30%, while August is expected to reach around 0.70%, translating to a year-over-year rate of +2.80%. The inflation outlook for the coming year remains between 2.20% and 2.30%.
Market expectations for interest rate cuts have moderated. The probability of a rate cut in August stands at 15%, with a 40% chance in September. The market currently anticipates the interest rate to settle at 3.80% in a year’s time.