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Alpha Israel Fund

An Israeli equity fund investing in cutting edge technologies

December 2024 - Monthly REPORT

December Report

SUMMARY

  • Israeli equities delivered strong returns in December, despite global share markets moving lower upon uncertainty concerning US trade policy and the downward path of interest rates.
  • Signs of easing inflation are raising hopes of lower interest rates in Israel over 2025.
  • The Fund returned +4.7% (Class A, AUD) and +4.5% (Class B, USD), while the TA 125 Index returned +5.8% in December.

PORTFOLIO

Top Holdings (alphabetically)

Bank Hapoalim BM
Israel
Diversified Banks
Bank Hapoalim B.M. attracts deposits and offers personal, corporate and institutional banking services. The Bank offers corporate finance, cash management, foreign exchange, investment advice, loans, securities brokerage, custody services, investment banking, foreign trade financing, and treasury services. Bank Hapoalim operats in Israel, the Americas, and Europe.
Bank Leumi Le-Israel B.M.
Israel
Diversified Banks
Bank Leumi Le-Israel attracts deposits and offers banking and financial services. The Bank offers consumer loans, mortgages, lease financing, insurance, mutual funds, and merchant banking services. Bank Leumi holds significant equity stakes in a number of non-financial corporations in Israel.
Fattal Holdings (1998) Ltd.
Israel
Hotels, Resorts & Cruise Lines
Fattal Holdings (1998) Ltd. engages in the management and operation of hotels in Israel and Europe. It operates through the following geographical segments: Israel, Europe, United Kingdom & Ireland, and Other. The firm managers the hotels Leonardo Plaza Ashdod, Leonardo Palza Jerusalem, Leonardo Palaza Haifa, Leonardo Club Tiberias, Harrods Tel Aviv, Becher House JHotel Tel Aviv, and Harrods Vitalis Eilat. The company was founded by David Fattal in March 4, 1998 and is headquartered in Tel Aviv, Israel.
Isracard Ltd.
Israel
Consumer Finance
Isracard Ltd. engages in the provision of credit card and loan services. It operates through the following segments: Issuance, Clearance, and Financing. The Issuance segment issues and operates credit cards such as Isracard, Mastercard, Visa, and American Express, as well as gift cards and dedicated purchase cards. The Clearance segment offers clearing agreements and financial services. The Financing segment provides financial services and solutions such as discounting, early settlement advances, and purchase factoring through products tailored to customer needs. The company was founded in 1975 and is headquartered in Bnei Braq, Israel.
Isramco Negev 2 Limited Partnership
Israel
Oil & Gas Exploration & Production
Isramco Negev 2 LP engages in exploration and production of oil and gas in Israel. Its products include natural gas and condensate. The company was founded in 1989 and is headquartered in Petach Tikva, Israel.

Sector Breakdown

Capitalisation Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Dec 2024 1

Alpha Israel Fund Class A (AUD)

1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. SINCE INCEPTION P.A.
Alpha Israel Fund Class A 4.7% 22.6% 16.9% 7% 8.9%
Tel Aviv Stock Exchange 125 Index 5.8% 28.6% 15.7% 5.7% 8.6%

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Alpha Israel Fund Class B (USD)

1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. SINCE INCEPTION P.A.
Alpha Israel Fund Class B 4.5% 22.5% 18.3% 7.9% 10%
Tel Aviv Stock Exchange 125 Index 5.8% 28.6% 15.7% 5.7% 8.6%

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Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

Market Review

Israeli equities delivered strong returns in December, gaining 5.8% in USD terms, completing a robust second half-year performance. This contrasted favourably with global equities, which finished the month 2.6% lower. This reflected concerns that interest rates might not fall as far as had been expected and that the new US administration’s trade policy might impact global economic growth.

Israel’s annual inflation eased to 3.4% in November, from the previous 3.5%, while prices actually fell 0.4% month-on-month. This was expected to lead the Bank of Israel to keep interest rates unchanged at 4.50% when it meets early in the new year. The market is now pricing in a rate cut in July, with rates expected to fall to 4.0% by the end of 2025.

The Composite State of the Economy Index changed little in November, continuing the trend of the previous two months. However, October industrial production edged up by 0.1% month-on-month, while November saw increases in consumer credit card purchases (+5.0%), imports of consumer goods (+9.7%), manufacturing inputs (+1.1%) and job vacancies (+1.4%).

Portfolio Commentary

The Fund continues to take a positive view of Israel’s economic and share market prospects despite the ongoing geo-political uncertainty. The Fund’s net equity exposure was maintained at around 90% in December, which supported portfolio returns in a strongly rising market.

The largest contributor to Fund performance during December was the Fund’s 5% holding in the world’s largest manufacturer of generic drugs, Teva Pharmaceuticals, which gained 31% in December.

The company announced successful Phase 2 trials in its development of a treatment for inflammatory bowel disease. Its estimated market size of almost US$30 billion makes it the most significant product in Teva’s pipeline.

The company is conducting clinical trials in collaboration with French-based global pharmaceutical group Sanofi, with which it will share costs and profits on a 50:50 basis. The groups are targeting sales of US$2 – US$5 billion, which is expected to contribute US$1 billion to Teva’s free cash flow, which is currently US$2 billion.

The Fund’s holding in Silcom, which designs, manufactures, markets and supports networking and data infrastructure solutions for servers, server-based systems, and communications, also contributed to relative returns in December.

The company is an industry-leading provider of high-performance networking and data infrastructure solutions. Designed primarily to improve performance and efficiency in cloud and data centre environments, Silcom’s solutions increase throughput, decrease latency and boost the performance of servers and networking appliances.

The Fund’s 5% holding in the printed circuit board manufacturing company Priortech also contributed to relative returns in December. It announced that it has received initial orders worth US$50 million from several customers in respect of its new Hawk product for delivery in 2025. The Hawk’s groundbreaking platform is capable of inspecting and measuring wafers with 500 million micro bumps.

Annual Review

2024 was another challenging year for Israel, which faced military conflicts on multiple fronts, leading to a notable slowdown in economic growth.

The war brought an increase in military spending from US$1.8 billion per month before the conflict to US$4.7 billion by the end of 2024. This surge in spending impacted the government’s fiscal position, leading to the budget deficit expanding to 7%.

Despite these challenges, the Israeli economy and stock market demonstrated surprising resilience. This was supported by a 15% year-on-year increase to US$11.8 billion in foreign direct investment over the first half of 2024. This signalled sustained international confidence in Israel’s economic potential, especially in the technology sector, despite the prevailing geopolitical tensions.

The sale of Israeli technology businesses through acquisitions and market listings increased in 2024 by 78% to US$13.4 billion. This included the acquisitions of Innoviz Technologies (US$2 billion) and SimilarWeb (US$1.4 billion). During the year, Intel announced a US$10 billion investment in advanced semiconductor manufacturing technologies in Israel.

Israel also increased its natural gas exports to Europe, which is now established as a key energy supplier amidst the ongoing energy shortage in Europe. This was achieved by a significant increase in production capacity within the Tamar field.

This economic resilience has been reflected in Israel’s equity market, which gained 28.6% in 2024, ahead of the major global indices. The Fund also performed strongly over the calendar year, returning 22.5% in USD terms. This was driven by its exposure to the high performing semiconductor and pharmaceutical sub-sectors.

Israel faced major geo-political challenges in 2024. However, its economy has remained highly resilient, delivering strong growth in the technology, healthcare and energy sectors whilst continuing to attract significant foreign investment.

While the military situation remains unresolved, the balance of power in the Middle East appears very different from that seen at the start of the year, with Israel in a stronger position. An eventual end to hostilities should create opportunities for Israel’s further integration into the Middle East economy, supported by US security guarantees. This should accelerate economic growth and support the local share market.

PROFILE

FEATURES

  • APIR CODE PCL6469AU (USD Class) CTS0045AU (AUD Class)
  • REDEMPTION PRICEClass A: A$1.2188
    Class B: U$1.2541
  • FEES * Management Fee: 1.50% p.a. paid monthly in arrears
    Performance Fee: 20% above the Hurdle with a high water mark, paid semi-annually in arrears
  • Minimum initial investment $250,000
  • STRATEGY INCEPTION DATE 1 January 2018
  • BenchmarkThe goal of the Fund is to achieve long term capital growth by investing In Israeli and Israeli related companies, generating returns that consistently outperform the relevant benchmarks. Returns are not guaranteed.

Fund Managers

Gabi Dishi

Founder & CEO

Michael Weiss

Founder & Managing Partner

Aviran Revivo

Managing Partner

Sagi Ben Yosef

Managing Partner

Description

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.

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1.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.
2. Inception 1st January 2018.
3. Annualised Standard Deviation since inception
4. Relative to Tel Aviv Stock Exchange 125 Index

Please note: This fund is only open to Wholesale Investors.