A Nation on the Move
By Israel Maimon
Israel Bonds milestones of the past few months - worldwide sales exceeding $40 billion since the first bonds were issued in 1951, and annual U.S. sales reaching a record $1.127 billion in 2016 - represent a defining shift as to why our clients, retail and institutional alike, acquire Israel bonds.
While clients clearly view Israel bonds as an overt expression of support for Israel, they also perceive the securities as significant investments for their financial portfolios.
On April 3 of this year, for example, the state of Ohio made a singular $61 million investment in Israel bonds that made the state the largest single entity holder of Israel bonds, with $165 million in its portfolio. Note Treasurer Josh Mandel’s primary reason for making the historic investment: “First and foremost,” he stated, “we are making this investment because it’s a good investment for the taxpayers of Ohio.”
Ohio is not the only state to take notice. Throughout the years, over 90 state and municipal public employee pension funds and treasury funds have invested more than $3 billion in Israel bonds.
The reason for this confidence in Israel is readily apparent. This is not the early days of the state, when Israel bonds were perceived as a kind of ‘contribution' to the wellbeing of a developing nation. Today, Israel bonds are widely viewed as investments in a global technological leader and standard-setting economic powerhouse.
Israel’s internationally recognized accomplishments are why Intel recently spent $15.3 billion to acquire Israeli company Mobileye, why foreign investment in the nation’s tech sector reached an all-time high of $4.8 billion in 2016, and why Israel’s January 2017 euro-denominated bond issue was four times oversubscribed.
Remarkable statistics issued by the Bank of Israel on March 29 complete the picture. Israel’s economy grew 4.0 percent in 2016 - double that of the U.S., 2.3 percent higher than the average rate for Organization for Economic Cooperation and Development (OECD) member countries, and 2.5 percent higher than the Eurozone average.
And that's not all. 2016 – the best year for Israel’s economy since 2012 – was highlighted by a number of unprecedented achievements: record low debt-to-GDP ratio of 62.8 percent; record GDP of $337 billion; and record numbers of citizens participating in the workforce.
All told, Israel’s economy has grown by a cumulative 21.6 percent since 2011, outpacing that of every member of the OECD.
So what are we to make of this data? Simply this: investing in Israel bonds is a means of becoming a stakeholder in one of the world’s most resilient economies - a nation on the move with no signs of slowing down.
As Warren Buffett, the world’s most famous investor, declared upon making a personal $5 million Israel bond purchase last November, investing in Israel bonds is “a terrific tribute to the country.”