New Hedge Fund Hot Spot – Israel

Israel – the hedge fund hot spot is becoming a magnet for hedge fund managers because of lower operating costs and brain power- the world’s highest number of Ph.D.s and hi-tech startups per capita.

By By Sharon Wrobel & David Waine to Bloomberg

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The country is becoming a magnet for hedge fund managers as lower operating costs, the world’s highest number of Ph.D.s and hi-tech startups per capita overshadow concern that Israel may be attacked by missiles from Tehran. The number of funds has grown to 60 overseeing about $2 billion from 13 in 2006, according to a survey of the local industry published in July by Tzur Management. Israel may be on track to replicate the growth that propelled Singapore’s industry from fewer than 20 managers in 2001 to 320 overseeing $48 billion in 2009, Yitz Raab, founder and managing partner of the Tel Aviv-based fund administration company, said in an interview on Nov. 11.

Brevan Howard Asset Management LLP, Europe’s second-biggest hedge fund, opened an office in Tel Aviv at the end of 2005. Sphera Funds Management, the country’s largest hedge fund, raised money in 2007 to start a global health-care fund which now has about $235 million under management. WorldQuant LLC, based in Old Greenwich, Connecticut, has a research and development team in Israel.
Nuclear Weapons

Since Iranian President Mahmoud Ahmadinejad said in 2005 Israel should be wiped off the map, Israeli leaders have been saying time is running out to stop the Persian country from developing nuclear weapons. There is a 33 percent chance Israel or the U.S. will launch a military strike against Iran’s nuclear sites by the end of 2013, according to odds compiled by Intrade.com, as of Dec. 25.

Israel, which was nicknamed “Start-Up Nation” in the 2009 book by Dan Senor and Saul Singer, has 54 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup firms per capita than the U.S., and the same people who drove that development in Israel’s technology industry are in place to develop quantitative models for hedge funds, Keinan said.
‘Unique Locations’

“In order to raise capital in unique locations, you have to offer something that is a lot stronger than what the average hedge fund offers,” Don Steinbrugge, the managing partner of Agecroft Partners LLC, a Richmond, Virginia-based firm that advises hedge funds and investors, said in a telephone interview on Sept. 20.

While global hedge funds are cutting trading costs amid a decline in volumes and deteriorating performance for the $2.1 trillion industry, available talent and lower operating costs are attracting investors to Israel.

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