BlueStar, the New York-based provider of Israel-focused indexes, is in advanced discussions with a number of institutions in the United States about prospective structured products linked to its indexes.
"There has been a steady drumbeat of interest for our Israel-focused indexes," said Steven Schoenfeld, founder and chief investment officer of BlueStar. "We are now at a stage, the process making part of the factory, where we are interacting with potential providers of the hedge, we are going over regulatory issues while at the same time determining client demand," said Schoenfeld.
Most of the interest is on BlueStar's tech index, the TA-BigiTech, according to Schoenfeld. "This index has recovered very strongly from the lows of early this year and is in fact at a high for the year," said Schoenfeld.
The TA-BigiTech, the benchmark for Israeli high-tech companies trading globally, is currently tracked by two products, one mutual fund and one exchange traded note (ETN), both from KSM as well by ITEQ, a Nasdaq-listed exchange traded fund (ETF). "Apart from structured products providers such as major Israeli banks operating globally, we have other players, the so called ETN issuers. These products are not as bespoke, they issue standardized index tracking products, but Israel is a huge market for this, the world's ninth-largest," said Schoenfeld.
There are two more prospective issuers who are essentially ready to go, just waiting for the market conditions to be right, according to Schoenfeld. "Most of the flows in Israel have been towards fixed income and yield, as in the US, so they are waiting for some of the interest to come from equities. We are quite optimistic there will be at least one, hopefully two new products on the TA-BigiTech index before the end of the year."
The company is also continuing conversations regarding its two economic exposure indexes: Solactive-BlueStar Israel Domestic Exposure Index (IDEI) and Solactive-BlueStar Israel Global Exposure Index (IGEI). "Perhaps most exciting is that several firms are looking at the idea of pairing the two, to see whether they create an outperformance structured product or a product that combines the weight of the two indexes, because the domestic oriented market performs differently from the globally oriented one.
"We are very gratified that these sophisticated financial institutions have picked up on the logic of these indexes and we hope that a lot is going to come out of it. We are also going to do one significant research paper before the end of the year on these indexes too," said Schoenfeld.
Meanwhile, BlueStar has appointed Joseph J. Levin (pictured) to the position of partner and chief investment strategist. Levin joins from the San Francisco-based Jewish Community Federation and Endowment Fund, where he held the role of chief development officer. He will spearhead BlueStar's growth with institutional and philanthropic investors while emphasizing the importance of Israel in mission-aligned portfolios, according to Schoenfeld.
"Joe's job is to stimulate demand from the broad Jewish and pro-Israel community for allocations to Israeli equities," said Schoenfeld. "Within the socially-responsible/mission-driven investment community, the whole idea of aligning portfolios is gaining enormous traction and we feel that there is a role for those types of strategies for an allocation to Israel."
The bulk of Levin's work will be with institutions, large endowments, foundations, family offices and community organisations to generate interest in investing in Israel, according to Schoenfeld. "Part of that would be to help create demand for products, including structured notes, issued by banks for the retail market," he said. Most of Levin's work with the Jewish and pro-Israel community would be outside of Israel, mainly in the United States but also in Canada and "over time in the UK and in continental Europe", according to Schoenfeld.
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