Local Hedge Fund Yields Erode in Q3, Erasing Early Lead Over Market Indices
Local hedge funds saw third-quarter yields erode, erasing their earlier advantage over stock and bond indices. Equity funds averaged a 9% return over nine months, trailing the TA-125 index.
Local hedge funds saw their yields erode in the third quarter, wiping out the advantage they held over stock and bond indices during the first half of the year, according to initial performance indicators obtained by Globes. Equity-oriented hedge funds posted an average net return of 9% in the first nine months of the year, after deducting management fees, while the TA-125 index, which serves as a benchmark for these funds, rose by about 11% over the same period.
At the end of the first half of the year, the picture was reversed: equity hedge funds posted an average return of 11%, compared to a 9% rise in the benchmark index. Similarly, in 2025, despite generating a stellar average return of 41%, hedge funds "lost" to the index, which surged by 51%.
The reason for the underperformance of the funds in the third quarter, which ended last week, was the materialization of the least favorable scenario for the industry: a stagnant market. Hedge funds typically shine when the market is volatile, utilizing investment strategies that involve purchasing expensive hedging options. By the end of the quarter, the TA-125 index rose by about 1%—a result of a solid gain in the TA-35 index (3.3%), offset by a similar decline in the secondary TA-90 mid-cap stock index.
Sphera Stands Out with Exceptional Performance
Standing out with exceptional performance is Sphera Long, established last year by Sphera, the industry's veteran hedge fund group. The fund, which manages an estimated 700 million shekels, recorded an extraordinary return of 41% from January to September, after generating 16% for its investors during its operational months in 2025.
Following Sphera in the rankings are Yoram Hadar's Hatzvim Long fund, which rose by 17%, and two funds from the Noked group—Noked Long and Noked Equity—with a return of 14% each, following impressive yields of 43% and 39% respectively in 2025. The Noked fund group, the largest in the industry by asset size, is managed by former Psagot investment house executives Roi Vermus, Shlomi Bracha, Hagi Badash, and others.
At the bottom of the ranking among prominent funds is Alpha Value, belonging to Gabi Dishi and Michael Weiss's Alpha hedge fund group, which fell by 7% in the first nine months of the year after delivering a 40% return last year. Above it is IBI's Raam Equity, managed by Daniel Alon, which dropped by 1% (following a positive return of 44% in 2025), and Ronen Matmon's Total Long fund, which—after a 45% return last year—ended January-September unchanged.
Similar Trends in the Bond Market
A similar picture emerged among bond-oriented hedge funds, driven by the dramatic surge in US bond yields, which recently hit two-decade highs and generated losses for investors. Thus, while the Tel Bond 60 index rose by 3% between January and September, nine bond-oriented hedge funds recorded an average return of 2%. In the first half, these funds rose by 3%, matching the benchmark's yield. In 2025, the trend was reversed: the funds rose by an average of 12%, compared to 7% for the Tel Bond 60.
The leader in the bond category since the beginning of the year is Sphera Bond, which rose by 6%, followed by Hatzvim Bond (4%) and Vertical, managed by Gili Anglister and Miko Mor (3%). At the bottom are Total Bond, which fell by 2%, Noked Bond, which remained unchanged, and Raam Bond, which rose by 1%.
Ron Senator, partner and founder of the Sphera hedge fund, points to the sharp rise in US bond yields as "a very acute factor in the markets that affected quite a few interest-rate sensitive sectors. This also trickled down here, though with a different intensity, because inflation here is lower, and short-term interest rates are on a downward trend. Therefore, the effect of rising bond yields in Israel was felt less.
"Still, this is not a 180-degree opposite trend—the American yield curve has an impact on the entire world. At the sectoral level, income-producing real estate stocks were pressured and dropped sharply amid fears of rising interest rates, as was residential real estate, a very sensitive sector. We saw this reflected in bonds and stocks."
Exceptional Profit Growth
According to Senator, "A second force affecting fund performance is the exceptional boom in corporate profits. This starts with the S&P 500 and Nasdaq, which recorded exceptionally sharp quarterly net profit growth averaging over 25%. This trickles down here to sectors like semiconductors and semiconductor equipment, and to sectors benefiting from the global boom such as defense and alternative energy. On the one hand, they enjoyed growth and favorable conditions, and on the other hand, they are interest-rate sensitive, so the effects were opposing. Locally, insurance and banks continued to post excellent results, growth, and rising profitability. This is a trend that has been ongoing for over two years.
"In the third quarter, there were several strong market moves that carry weight in Israeli indices. Chip and semiconductor equipment companies—Nova, Camtek, Tower, and several smaller ones—dropped by tens of percents amid multiple contraction and sharp profit-taking in the Wall Street sector. Their weight in the indices is not small, and that had an impact.
"Renewable energy stocks also fell (the TA Renewable Energy index lost 22% in the quarter)," he adds, "after reaching an exceptional level of optimism in the second quarter. We experienced quite violent corrections."
It should be noted that hedge fund performance is not publicly published. Globes gathers data from multiple sources and cross-references it to verify accuracy. The asset volume managed by each fund is not publicly exposed, and therefore we make every effort to reference the most prominent and respected entities in the hedge fund industry.
