Ayalon Insurance Raises 1.2 Billion NIS but Faces Backlash Over Low Yields
Ayalon Insurance raised a massive 1.2 billion NIS in August after re-entering the provident fund market, but faced criticism as its initial yields fell significantly below the industry average.
Aggressive Marketing and Trips to Sydney
This past August will be remembered at Ayalon Insurance as an unprecedented marketing success in the Israeli financial market. The company, which re-entered the provident fund (kupat gemel) and study fund (keren hishtalmut) market after a ten-year absence, recorded a massive inflow of 1.2 billion NIS into its new funds. This achievement was second only to Phoenix, which is estimated to have raised approximately 1.5 billion NIS.
The aggressive media campaign was accompanied by a glittering incentive for insurance agents: a flight to Sydney, Australia, for those who met the recruitment targets. According to the publication, eligibility for the trip required raising 16 million NIS, of which up to 6 million NIS could come from the new provident funds, with the remainder from financial policies. Ayalon offered agents a one-time volume commission of 7,000 to 9,000 NIS for every million NIS recruited into its provident and savings products.
How extraordinary Ayalon's achievement is can be inferred from a comparison with More Investment House, which began operating in January 2019 after acquiring Intergemel and raised just 4 million NIS in its first month.
Yield Discrepancies and Executive Explanations
However, despite the successful fundraising, the investment yields did not meet the same high standard. According to Mitgav's monthly summary, the average yield in August for the general track of provident and study funds stood at 1.1%, while the equity track averaged 2%.
Although Ayalon's official yields are not yet public, yield calculators provided by the company itself indicate that its general provident tracks yielded approximately 0.6%, and its equity tracks yielded 0.9%.
In closed conversations with agents, Tamir Hershkovitz, Senior Vice President and Head of Ayalon's Investment Division, attempted to explain the difference in yields. According to him, continuous operations only began at the end of July, and the money actually started flowing in during the second week of August, with the majority of the funds arriving in the final week of the month. Hershkovitz argued that due to transfer and regulatory processes characteristic of the provident fund sector, the money was actually active for a very short period of 10 to 14 days.
Nevertheless, since the calculated yield was divided by the average assets of the entire month, the reported figure was eroded and does not reflect the true investment management capability. Hershkovitz clarified that building positions takes time, and estimated that September would be the first full month in which the funds would accumulate yields from day one.
Competitors Reject Explanations
Executives at competing firms dismissed this explanation, stating:
"The yield of a track is measured daily on the money that is already inside. If 350 million NIS entered on the last day, it is absolutely not supposed to erase or dilute the yield achieved by the hundreds of millions that were already invested from day one."
It was also argued that Ayalon operates under a "basket system," whereby the equity or general track in the provident fund is managed under an existing asset basket of veteran financial policies that already manage billions, meaning it does not truly matter when the new money entered.
Ultimately, these figures put insurance agents in an awkward position. Those who joined the campaign and sold Ayalon's products to clients discovered that in the first month, their clients lost out on alternative yields compared to competitors. The industry's eyes are now on September, when it will become clear whether this was merely technical teething pains or a professional gap in investment management.
