Blue and White Fund Scores by Betting on Israeli Firms

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There are dollars to be made betting on Israeli companies and the $4 million Blue and White Fund has the track record to prove it. It’s up 33% since its December 2002 debut.


The fund’s performance would be even more dramatic – on December 31,it was up 40.26% since launch – but returns have suffered under the global weakness in technology stocks.


Moreover, the Blue and White Fund has taken an unusual approach to marketing – it gives shares to youths as bar and bat mitzvah gifts. The fund also gives shares to first communion and confirmation candidates.


The shares are worth $18 – in Hebrew, the letters making up the number also spell “chai,” or “life.”


“We do it so that youngster’s can develop an appreciation for saving and investing in companies that are doing a lot of good for Israel and the world,” said the fund’s East Coast representative, Yonotan Yair. Less altruistically, he said he hoped that once recipients saw the fund’s returns, they would add it to their investments. Mr. Yair said the reason the fund – whose returns handily outperform any equity index measured against it – has such a small asset base is it’s lack of a track record.


“We’ve only been around 19 months,” he said. “We are appealing to people to invest in the company for performance reasons, not sentimental or charitable concerns,” as is the case with support for State of Israel bonds among the Jewish investing community.


“Israel bonds,” as they are widely known, primarily go to fund infrastructure, such as highways and water filtration plants. Mr. Yair also said the lack of public listing for the shares has hurt credibility among potential investors.


However, the fund recently satisfied one of the Security and Exchange Commission’s requirements for listing mutual fund shares. The fund – the brainchild of Beverly Hills-based stockbroker Shlomo Eplboim – invests in Israeli “new economy” computer hardware, pharmaceutical, and software companies, aiming to take advantage of what Mr. Yair calls the unusually high density of engineers and “hard science” types in Israel.


Israel has the largest amount of per capita startup companies in the world, and the second most, behind America, in absolute terms, he says, quoting recent economic surveys released by the Israeli embassy.


“If you have four Israelis together, you’ll have five opinions and six CEOs. We’re just trying to connect their intellectual capital with some private capital,” said Mr. Yair.


Independent researcher Credit-Sights’ co-founder, Peter Petas, said that as the global economy resumes a healthier growth rate, the export-driven Israeli economy should benefit.


“Many Israeli companies are innovators, with either mass-market or profitable niche appeals,” he said.


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