As Israel becomes a leading innovation hub, more and more ETF‘s are appearing to tap into this attractive market.
Investing in the “start-up nation”
While the USA still holds the crown in the global technology scene, other countries are emerging as leaders in this sector. Among these, Israel has one the most dynamic and fast-growing tech industry in the world. Often described as an “innovation powerhouse” and a “start-up nation”, Israel is a key player in up-and-coming subindustries such as fintech and health-tech. And investors are eager to get involved. This is why this week ARK Investment Management LLC launched a new ETF to respond to this demand.
The Israel Innovative Technology ETF (IZRL) debuted this Tuesday, joining ARK’s portfolio of passively managed products. Its management style is somewhat surprising as the company is better known for its actively managed funds, such as the ARK Innovation ETF (ARKK 0.28%) and the ARK Web x.0 ETF (ARKW 0.29%), but this may provide better protection from risk.
A robust underlying index
According to ARK, this exchange-traded fund seeks to “provide investment results that closely correspond, before fees and expenses, to the performance of the ARK Israeli Innovation Index, which is designed to track the price movements of exchange listed Israeli companies whose main business operations are causing disruptive innovation”. More particularly, the index is divided in the following sectors: Information Technology (56.9%), Health Care (20.1%), Telecommunication Services (12.0%), Industrials (9.0%) and Consumer Discretionary (1.9%).
This Israeli index has a proven track record of robust performance. In fact in the press release, it was highlighted that “the ARK Israeli Innovation Index has returned 17.9 percent at a compound annual rate as of Sept. 30, 2017, outperforming the MSCI Israel Index (MXIL: -10.1 percent annualized) and the MSCI Israel Capped Investable Market Index (MISCNU: 4.3 percent annualized),”
IZRL and its competitors
Currently, the iShares MSCI Israel Capped ETF (EIS) is the most traded ETF for Israeli companies. However, only 28% of EIS is dedicated to pure tech against 56.9% in IZRL, which means the latter could end up being more rewarding for investors. Among other popular Israel focused ETF’s, VanEck Vectors Israel ETF (ISRA) and BlueStar TA-BIGITech Israel Technology ETF (ITEQ) are also worth a watch.