Israel's sovereign wealth fund reaches $2 billion despite ongoing challenges

In 2024, Israel's Sovereign Wealth Fund, known as the Citizens' Fund, achieved significant growth, reaching approximately $2 billion in assets by the year's end, as noted in the Ministry of Finance's annual report. The comprehensive report highlights that the fund's impressive performance was driven by global market trends and stock price surges following Donald Trump’s recent U.S. presidential election victory. With an 11.5% investment return for the year, the average annual return since the fund's inception has risen to 11.7%. Established under the 2014 Israeli Citizens Fund Law and launched in June 2022, the fund manages state revenues derived from taxes on natural resource profits. It aims to bolster the economy by investing in initiatives, such as renewable energy, research and development, and job creation in the Negev region. This fund is also seen as a stabilizer during financial downturns and helps mitigate risk from sudden revenue fluctuations due to natural resources. In 2024, revenues added to the fund from natural resource taxation amounted to approximately $417 million. The fund's investment strategy underwent a notable shift in 2024, with its equity investments increasing from 60% to 70%, while bond investments fell from 40% to 30%. This strategic pivot reflects a confidence in the performance of stock markets, particularly in developed economies, which proved beneficial. The fund's manager, the Bank of Israel, continues to advocate for a long-term investment policy, emphasizing stability and sustainable growth amid economic challenges. However, this year has been particularly complex for Israel, and Finance Minister Bezalel Smotrich has stressed the importance of focusing on long-term economic strategies to address future challenges. Although details regarding expenditures were not provided in the report, it was confirmed that 3.5% of the fund's assets would be directed toward social, economic, and educational projects within the state budget, which amounts to about NIS 189 million ($50.9 million) allocated for 2025. Controversy arose during the budget planning stage when the Committee for Supervision of the Israeli Citizens Fund approved allocations that some suggested contradicted the law's intent, as noted by legal advisor Sagit Afik.