The word ‘Bond’ conjures up a dark and seductive world of intrigue and action. The same cannot be said of the word ‘bonds’. Yet for Israel, only the latter is of interest, for bonds help pay for Israel’s development. As it stands, the vast majority of those buying Israel’s bonds are Jewish and American. But there is no reason why only the Americans should get in on the act. Time for a money-penny lesson…
Israeli government bonds are issued roughly every five years on stock exchanges such as London by the Ministry of Finance. The last one was two months ago, raising about £2 billion. These bonds are bought by major institutional investors (some buy hundreds of millions of pounds’ worth) and can then be traded on the stock exchange i.e. once bought, they can be sold.
If you’re not a pension fund willing to wait five years, you may be interested in Israel Bonds (IB), which offers smaller, non-tradeable bonds to the likes of you and me throughout the year. Whereas the ministry might sell 15 or 20-year bonds, IB offers two, three, five and 10-year bonds. The 10-year bond currently gives 3.8 percent interest a year – a good barmitzvah gift, if ever there was one.
IB’s client is the state of Israel, and the company acts as the broker dealer, raising foreign currency for Israel to develop its economy, whether that’s to manage the debt or manage investment. The money raised could go into agriculture, infrastructure, high-tech incubators or sewage system upgrades – whatever is needed.
IB is now headed by Israel Maimon, a lawyer who once commanded the IDF’s elite Golani Brigade, and later acted as Cabinet secretary to former prime ministers Ariel Sharon and Ehud Olmert. He spoke to Jewish News in London last week, and explained that only $8 million Israeli bonds were sold in the UK last year. Yet with $40bn in sales since its foundation by David Ben-Gurion in 1951, and with no defaults, he thinks now is the time to expand.
But there is a problem – a cultural problem. In the States, American Jews are used to ‘investing in Israel’ and expecting financial returns. Here in the UK, Jews have never seen it as a profit-turning exercise. Instead, British Jews tend to give to Jewish charities working in Israel. But Maimon says the two are not mutually-exclusive. “The two ways of supporting Israel are not only complementary, there is room for both.”
Bonds have helped build every sector of Israel’s economy, he says, including the high-tech, green-tech, clean-tech and bio-tech industries. They are viewed favourably by the big ratings agencies in part because of Jews around the world.
Last November, Fitch noted “an active diaspora bond programme” as a reason for confidence. In August, Moody’s said: “Israel can also depend upon financial support from the global Jewish community.” So IB knows the ratings agencies recognise that the diaspora can be a unified force for Israel.
“It’s a way for them to support Israel,” says Maimon. “They’re doing it because it is a good investment, and it demonstrates their support. We could do much better in the UK. Israel Bonds isn’t a charity. It’s not about philanthropy. You as an investor can buy Israeli bonds, you get interest, and in the end you get the amount you invested.”
Alan Curtis, a member of IB’s London team, said: “There’s always been great support for charities from the British Jews. By contrast, for US Jews, the default is investment through bonds. So we’re trying to introduce the concept here, and say it sits alongside support for the charities. The two are complimentary.”
Maimon adds: “If you want to support your synagogue, or a charity supporting special needs kids, you can buy an Israeli bond and give it as a gift to the shul or the charity. So you’re doing
a double mitzvah!”