First Israel-Focused Bond ETF Launches

Defiance ETFs, a thematic-focused exchange-traded fund firm with $1.2 billion in eight ETFs, launched the first Israel-focused bond fund this week as conflict rages in the region.  

The Defiance Israel Bond ETF (CHAI) tracks the Midgal Capital Markets BlueStar Israel Bond Index and launched on Dec. 13. The index provides exposure to Israeli shekel and U.S. dollar debt issued by the Israeli government or companies. The fund’s bonds have an average of 8.3 years to maturity and an average yield to maturity of 5.73%. The fund pays interest every month.  

The top holdings of the fund include the Israel Discount Bank Ltd. 2.68%, which matures in 2030, and the Mizrahi Tefahot Issuing Co. Ltd. 2.98%, which matures in 2025.  

The launch marks the fifth U.S.-traded ETF focused specifically on Israel. It comes on the heels of Israeli ETFs tumbling in the aftermath of Hamas's Oct. 7 attack on Israel, and Israel's subsequent invasion of Gaza in an effort to topple the governing body that's been labeled a terrorist organization by the U.S. The largest Israel-focused ETF, the $126.35 million iShares MSCI Israel ETF (EIS), fell 7% on Oct. 9, before recovering in the next days. The fund is up 10% in the past month despite continuing battle.  

Fixed-Income Opportunities  

With just a couple of weeks left in 2023, analysts have warned investors to get off the sidelines and pursue growth opportunities in both equities and fixed income. 

“2024 will be a year to pick your spots in fixed income,” Gargi Pal Chaudhuri, head of iShares Investment Strategy Americas at BlackRock, wrote in the firm’s 2024 report with other investment strategists at the company.  

Defiance’s largest fund is the Defiance Next Gen Connectivity ETF (FIVG) with $568 million under management.  

Contact Lucy Brewster at [email protected].