According to Morningstar data, 22 investment companies hold investments in Israel, which boasts several market-leading technology companies, including software and cybersecurity businesses.

Throughout the week, markets have started to digest the shock attacks by Hamas militants across Israel last weekend and the subsequent ongoing conflict, which is the worst in 75 years with at least 2,700 people killed in Israel so far.

The Tel Aviv Stock Exchange has been volatile, with the TA-35 stock index of blue chip companies down 7.1% at one point, weighed by steep falls in some financials and oil companies, but recovering to stand 1.8% lower.

Worst hit is oil exploration company the Delek Group, which has fallen 15.4% in the past five days, and hydrocarbon exploration and production company Energean, which is dual listed on the London Stock Exchange, and has retreated 14.8%. Bank Leumi and Israel Discount Bank have declined 13.1% and 12.6% respectively. 

While concerns are first and foremost focused on the humanitarian impact of the conflict, fund managers are considering what the outbreak of war could mean for the Middle East and for the global economy. Phoenix, BlackRock, Vanguard, Legal & General Investment Management and Fidelity International hold a collective 21% of Energean’s stock along with several other positions in the bottom four performers of the TA-35.

In the London-listed investment company sector, ten trusts, including three run by Baillie Gifford, have more than 1% of their portfolio in the war-hit country, according to Morningstar data from the Association of Investment Companies (AIC). 

Trusts and Israel 

 Source: AIC / Morningstar

The £114m Artemis Alpha (ATS ) investment trust has the largest exposure at 5% of its portfolio, which is all held in London-listed Plus500, a global technology firm providing online trading services for investors. The company, which is founded and based in Haifa, a northern Israel port city, has subsidiaries across the world. 

Kartik Kumar, co-manager of ATS, which has held the company since 2016, said he continues to be a ‘supportive shareholder’. The company, which fell foul of the Financial Conduct Authority for ID documentation infractions in January, is down 17 points or 1.24% to trade at £13.51. 

Baillie Gifford has the largest investment company manager exposure with its £640m Edinburgh Worldwide (EWI ), £590m Baillie Gifford US Growth (USA ) and £11.7bn flagship Scottish Mortgage (SMT ) disclosing 3%, 1.6% and 1% respectively.

Baillie Gifford declined to comment but Edinburgh Worldwide, a global smaller companies fund, lists freelance service marketplace Fiverr, software development tool producer JFrog and cybersecurity solutions provider CyberArk Software among the 86 listed stocks that make up 80% of its assets.

The companies, which are listed on the Nasdaq and the NYSE, have mixed performance in the past five days with Fiverr up 5.4% to $25, JFrog down 1.3% to $23.57 and CyberArk up 5.8% to $164.92. 

Based on annual and interim reports it is not clear which holdings within the US Growth and Scottish Mortgage trusts are Israeli. However, both own Tel-Aviv-based online cosmetics company Oddity at 1.3% and 0.6% of their portfolios respectively. Oddity, which listed in the US in July, has rallied 13% to $29.09.

JFrog and CyberArk are held by Polar Capital Technology (PCT ) too, which also declined to comment.

Herald (HRI ), a £1.2bn global technology trust, has positions in CyberArk along with Radware, another cybersecurity provider which is down 2% to $16.35, along with a number of other smaller holdings.

Herald fund manager Katie Potts said that these Nasdaq-listed companies have research and development in Israel but the majority of sales are elsewhere and she does not anticipate ‘material short-term impact on trading’.

‘There is one semiconductor holding Tower Semiconductor which has a fab [manufacturing plant] in Israel, but the majority of their capacity is elsewhere,’ Potts explained. The exposure, which is small, has not been reduced and the manager hopes ‘the effect will not be serious’.

‘It is a gesture of support to them not to cut and run in an environment that must be challenging,’ she added. ‘Clearly, we shall watch the situation carefully and our thoughts may evolve.’

Tower, which told Citywire there had been no impact on operations yet, has seen its share price drop 6.8% to $22.46 since the conflict started.

Miton UK Microcap (MNI ) also makes the list due to its second-largest holding, London-listed MTI Wireless Edge (MWE), an antenna solutions developer headquartered in Israel, which has gained 4.8% to 40.4p.

Companies respond

Citywire contacted the Israeli companies held by the investment trusts to understand the impact of the conflict on their operations with only CyberArk and Fiverr responding in time for publication. 

They both said that their immediate focus was on helping their employees on the ground. They said that while it was business as usual in most respects, some of their employees are being called up to support the military effort as the Israel Defense Forces mass 300,000 reservists in preparation for a ground assault on Gaza where Hamas is based. 

A spokesperson from CyberArk said the team in Israel, the majority of which are in research and development, were safe and the company was ‘horrified by the atrocities committed over the weekend and concerned by the ongoing events’.

‘Our workforce in Israel is very accustomed to working remotely and in pressure situations,’ the company added. ‘The people of Israel are resilient and strong and we as a company stand with them always.’

Fiverr also said only a portion of its team was in the country and it is ‘making sure the rest of the operation is supportive’ adding that it was working with a coalition of other companies to donate supplies to troops defending Israel. 

Separately, three London-listed companies have published statements in the wake of the developments. These are BATM Advanced Communications (BVC), a developer of telecommunications products, maritime AI company Windward (WNWD) and shipping tracking and analysis company T42 IoT Tracking Solutions (TRAC), all of which said the events are not expected to have a material impact on their operations, despite their exposure to Israel. 

BATM has seen its share price tumble 21% this week to trade at 23p, while T42 has declined 8% to 2.76p but Windward has advanced 6.8% to 73.7p. 

Nvidia angle

Along with the investment companies included on the list, several others will have indirect exposure to the conflict.

Global companies, particularly those in the technology space, have operations in the nation. Included in this group is widely-held chip designer Nvidia, which acquired Israeli networking company Mellanox in 2020, which continues to have substantial operations in the country. Nvidia, a Citywire Elite Companies + rated business, cancelled an artificial intelligence event which was due to be held in Tel Aviv on Sunday.    

According to Morningstar, Nvidia is a top holding in Allianz Technology Trust (ATT ), Martin Currie Global Portfolio (MNP ), Manchester & London (MNL ) and JP Morgan Global Growth & Income (JGGI ) along with several others.