Tuesday, June 27, 2006
I give up and join the procession
There is no profit in swimming against the current. The world has decided that Israeli water technology companies are the thing to invest their savings in. Who am I to keep telling them that they are wrong, that there is no water bonanza in Israel or anywhere else? I am joining them, and from hereby on I join the chorus.
Yesterday I surveyed a business in Ezra and Yishmach Moshe (Mozes will be glad) streets corner in Bney Brak. The picture left is the main water system of the school, and it stinks terribly, as it was a very hot day. But reality cannot convince me, I was convinced by Globes. We must be wonderful, and I am a depressed pessimist (if not an outright antisemite and saboteur) that cannot see that.
World Pension Forum delegation of US and Canadian investment institutions visited Israel last week. California Department of Finance chief deputy director Anne Sheehan, who sits on the boards of California Public Employees Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS), was one of the delegates.
CalSTRS managed $201 billion as of June 2005. The pension fund is committed to pay pensions to 775,000 retired state public school teachers from the kindergarten through college levels. CalSTRS’s 12-member board decides on investments and sets policy. It has invested in Israeli companies, including Alvarion Ltd. (Nasdaq: ALVR; TASE: ALVR), AudioCodes Ltd. (Nasdaq: AUDC; TASE: AUDC), Bank Hapoalim (LSE: BKHD; TASE: POLI), Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), Blue Square Israel Ltd. (NYSE: BSI; TASE: BSI), Check Point Software Technologies Ltd. (Nasdaq: CHKP), Clal Industries and Investments Ltd. (TASE: CII), ECI Telecom Ltd. (Nasdaq: ECIL), Elbit Systems Ltd. (Nasdaq: ESLT; TASE: ESLT), Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN), Koor Industries Ltd. (NYSE: KOR; TASE: KOR), Lipman Electronics Engineering (Nasdaq: LPMA; TASE: LPMA), M-Systems Flash Disk Pioneers Ltd. (Nasdaq: FLSH), MA Industries Ltd. (Makhteshim Agan) (TASE: MAIN), NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE), Orbotech Ltd. (Nasdaq: ORBK), Radware Ltd. (Nasdaq: RDWR; TASE: RDWR), Retalix Ltd. (Nasdaq: RTLX; TASE: RTLX), Strauss-Elite Ltd. (TASE:STEL), Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), and Mizrahi Tefahot Bank (TASE:MZTF).
CalPERS manages $145 billion, and has invested in eight Israeli venture capital and private equity funds: Apax Partners, Carmel Ventures, Gemini Israel Funds, Giza Venture Capital, Israel Seed Partners, Jerusalem Venture Partners (JVP), Markstone Capital Partners Group LLC, and Pitango Venture Capital.
Investing in venture capital funds is part of an alternative investment plan. According to CalSTRS’s reports, alternative investments made a return of 24.9%, 18% better than the average. The fund published its results for its fiscal year in July 2005, and showed a positive performance for the third consecutive year, with a return on investment of 11.09%.
Sheehan was appointed by California Governor Arnold Schwarzenegger. She previously served as a senior manager at the California Building Industry Foundation (CBIF).
“Globes”: Each quarter, venture capital fund managers wither in the face of CalPERS’s quarterly reports on their performance. Do you know how much that hurts them?
Sheehan: “The media petitioned the courts on this matter, and the ruling was that the reports must be published. California state law mandates the state pension funds to disclose their performance, and operate with maximum transparency.”
With that in mind, are there those who say ‘No’ to CalPERS?
“Absolutely. Because of the nature of investment in venture capital, the reports are basically a freeze frame that in many ways does not represent the big picture.”
What was the purpose of the visit to Israel?
“This was an opportunity for us to see what’s going on up close. We came to see the companies and funds we’re invested in, and examine investments in other funds and companies. A visit helps provide a perspective. The picture emerging from the newspapers’ international news pages doesn’t always reflect the picture on the ground. The picture I got is of a rapidly growing economy, an economy that reacts quickly to change. The State of California has a history of support for and investment in Israel, and the present governor, Schwarzenegger, is committed to continuing investment.”
Especially in funds that invest in technology?
“Not necessarily. During the visit, we were exposed to developments in water tech. As you know, California has a water supply problem. The economy is growing rapidly, and the state needs to supply the quantity of water needed. Israel has a lot of interesting developments in this area.”
Do you intend to enter non-financial investments in Israel and other investment areas, such as US and international hedge funds?
“We’re looking for non-financial investments in Israel, and we’ve previously invested in funds that invest in Israel. As for hedge funds, we don’t yet invest in them, but some pension funds in the US have already entered this area.”
What is the size of each fund’s investment team?
Sheehan gives a cautious and conservative estimate. “30 to 50 people divided into teams, each of which specializes in the relevant sector. Some of our investments are also outsourced to external management firms.”
As said, who I think I am to go against the current? These people made 25% a year, they have nothing to prove, so they must be right.
I MUST rethink the whole situation. Who is making money in the water industry in Israel?