Amid War, Tech-Heavy Israel ETFs Endure

One of the most difficult things for an advisor is to compartmentalize at times of heightened global tension. 

I can easily recall contacting clients who lived in the New York City area in the immediate aftermath of September 11, 2001, reaching out to them repeatedly. I had worked in the World Trade Center on two separate occasions, including being one of thousands who walked down more than 90 floors to safety in 1993, when terrorists exploded a bomb in the basement that killed six and injured scores.  

The most memorable part of that initial 9/11 period was how virtually no clients wanted to talk about what might happen to their portfolios. The markets were closed for about a week, and no one knew what to expect when they would eventually start up again. Everything had taken a back seat to the human suffering, and people figured they'd get back to investment management mode later, at the proper time.  

For financial advisors confronting the realities of a pair of wars, one between Ukraine and Russia and the other between Israel and Hamas, they do not have the luxury of putting off the investing byproduct of what such turmoil does to markets, and by extension, to the portfolios they oversee for clients. That means they need to manage client communication simultaneously on two levels: the impact of geopolitical events on clients’ emotions, and potentially on their wealth.

A Leading Innovation Economy 

That makes this a most intriguing time to examine the fact that one of the most progressive, modern economies, and home to an extensive list of innovations, particularly in technology and biotechnology, is one of the countries in the middle of the fray. That is Israel, which in addition to producing a lot of intellectual property for a country the size of New Jersey, is also the home country of a large number of stocks that trade on US stock exchanges.  

No surprise then that several ETFs invest in Israeli stocks. While every advisor and investor chooses how much attention to pay to that aspect of the global equity market, it is worth reviewing some of the ETF offerings that have existed for some time and are available on U.S. exchanges.

Four Israel ETFs

Not surprisingly, the largest ETF issuer runs the largest and longest-tenured fund devoted to Israel, the $160 million iShares MSCI Israel ETF (EIS) which actually own a portfolio entirely constructed of stocks trading on the Tel Aviv Stock Exchange.  The fund was the only one in its peer group that was still positive for the year to date as of last Friday.

The $105 million ARK Israel Innovative Technology ETF (IZRL) is an equal-weighted index of companies producing advancements in genomics, health care, biotechnology, industrials, and other industries. The fund’s existence is a testament to the level of innovation emanating from Israel, as ARK’s funds are noted for their pursuit of companies with potential to be, as ARKK Founder Cathie Wood frequently says, “disruptors” in their fields.  

The $85 million Amplify BlueStar Israel Technology ETF (ITEQ) includes defense technology, clean energy, water technology, and other high tech stocks. It does extend its list of eligible stocks to companies that derive significant revenue, have majority of management, or have an R&D center in Israel. The fund was started and run by BlueStar until three months ago, when Amplify ETFs added it to their fund family.  

And, Van Eck Israel ETF (ISRA) is a $63 million fund that goes anywhere in terms of company size (market capitalization).  ISRA excludes REITs, Limited Partnership stocks and over the counter securities from consideration.