Strong shekel wipes out sovereign wealth fund returns

Israel’s Sovereign Wealth Fund, known as the Citizens’ Fund, which invests part of its gas and other natural resource profits outside Israel, recorded an exceptionally large US dollar profit of 18.4% in 2025, with a profit of $411 million (NIS 1.38 billion). But the strengthening of the shekel against the dollar wiped out NIS 1.1 billion of the profit, leaving only a 3.8% return.

At the end of 2025, the fund contained NIS 8.666 billion. The aim of the fund is to channel gas and mineral profits (such as Dead Sea minerals) abroad, to prevent excessive strengthening of the shekel and the “Dutch disease” in which an overly strong currency makes it difficult for exporters, as well as a permanent increase in government spending whose revenues are too dependent on fluctuating gas profits.

A sovereign wealth fund is a common way for countries rich in natural resources to direct investments abroad to stretch the profits from them over time, thus preventing an “addiction” to easy profits for the government as well as excessive strengthening of the currency. The largest wealth fund in the world is the Norwegian Sovereign Wealth Fund, which contains about $2.1 trillion, with its income from the country’s oil profits.

Fund established after a billion shekels accrued

The Citizens Fund is Israel’s Sovereign Wealth Fund, which was established in 2014, following the discovery of natural gas in Israel’s economic waters. According to the law, the excess profits tax (Sheshinski tax) is paid to it and not directly to the state treasury. The tax began to be collected after the gas production companies themselves reached a certain profit threshold on their investment, which they only achieved in recent years. The fund began its operations in June 2022, after a billion shekels had accrued.

In 2025, the fund received about NIS 1.2 billion from levies on the gas companies and ICL (which has the minerals concession), and NIS 233 million were allocated to the state treasury for projects that meet the terms of the law.

The fund earned $411 million, which is an exceptionally high dollar return of 18.4% – much higher compared with recent years, when on average the fund recorded an annual return of 13.6%. However, currency fluctuations led to the fact that in shekels, this is a total profit of only NIS 238 million, which is a shekel return of 3.8%. This is not a particularly bad return given the circumstances, but this rate is not stated in the report published on the fund, although it can be calculated from the tables attached to it.

The fund has a large majority (69.3%) of stocks, and the rest is debt of varying degrees and a little cash. About two-thirds of the fund’s assets are invested in North America, and probably specifically in the US, and the rest in Europe, Japan, emerging markets and a few other developed countries.

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In terms of sectors, the fund has invested mainly in technology, financial, consumer products, industry, healthcare and communications (in that order). This is while adhering closely to the MSCI global index. Over 70% of the currency in which the fund is invested is the US dollar, which makes its weakness particularly influential on its performance. Slightly under 20% was invested in the euro, and the rest in other currencies.

The return was significantly higher than average

Minister of Finance Bezalel Smotrich said, “The fund serves as a strategic pillar of national resilience. It is the mechanism that ensures that the state’s revenues from natural resources will not be depleted by use for current needs but will form the basis for intergenerational financial stability. At a time when the state is required to make huge investments in reconstruction, defense and civil support, the existence of an economic anchor that is disconnected from the current budget strengthens the confidence of investors around the world and the security of Israeli citizens in their future.”

The fund’s investment committee chairman Yarom Ariav added, “In the past year, the investment committee continued to expand the diversification of the portfolio. This year, we expanded the investment channels towards private investment funds, while intelligently combining active and passive management. These steps are designed to maximize the fund’s return potential within a controlled and long-term risk framework.”

Published by Globes, Israel business news – en.globes.co.il – on April 15, 2026.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.