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Though some investors are uncertain, financial
experts are optimistic that the value of Israel's first
mutual fund will climb.
KIMBERLY LIMN STAFF WRITER
etired accountant Benno
Levi of Oak Park isn't too
worried about his invest-
ment in the First Israel
Fund (FIF), the country's
only closed-end mutual fund.
Mr. Levi's initial purchase of 1,000
shares, first offered to the public on
the New York Stock Exchange in
1992, cost him $15,000. It is part of
an overall portfolio he believes will
prove rewarding.
When the fund was first offered at
$15 a share, Mr. Levi told all of his
friends to buy it. And when it im-
mediately dropped to $13 a share, he
assured these friends who were
soured by the performance that this
was a fluke. Buy now, he told them,
and it will go up.
"I know there is a great deal of op-
portunity in Israel today," Mr. Levi
said. "It is a vibrant country with
high-technology industries.
"If peace comes, Israel will become
the Switzerland of the Middle East,"
Broker Allen Olender
Mr. Levi said. "If Israel grows, this
fund will grow."
Despite Mr. Levi's predictions,
stockbrokers warn that FIF is risky.
Israel's economy has been growing
steadily each year by 6 percent, but
the country's location in the unsteady
Middle East leaves the fund volatile.
After FIF opened to the public at
$15 a share, it fell to 12% within a
few weeks. It has wavered ever since,
reaching a low of 11% and a high of
17Y the month after the famous
White House handshake between
Yassir Arafat and Yitzhak Rabin.
This past week, the fund was trad-
ing at 15% per share.
Stockbrokers said Mr. Levi's atti-
tude is rare. They said many in-
vestors wilt; participated in the initial
public offering of this mutual fund
were rightfully angry. The fund
hasn't performed very well.
Still, investment advisers are
telling shareholders to hold tight.
The fund, they said, got off to a shaky
start due to poor management — not
a poor economy.
FIRST ISRAEL FUND
Initial Public Offering 10/22/92 $15.00 per share
10/22 10/30 11/30 12/31 1/2 2/2
3/3
4/3
5/2 6/3 7/3 8/3
Month-End Closing Price
Source: Prudential Securities, West Bloomfield
Price Per Share
9/3
10/2
11/30
12/2
"The initial offering was a disas-
ter, and it soured investors," said for-
mer Detroiter Alan Leventen, a vice
president for Merrill Lynch in New
York who tracks Israeli stocks. "A lot
of investors were furious, but as an
organization, we told people it would
be O.K. The average price was down,
and it was trading at a 15 percent
discount.
"If a stock is trading at a discount,
we believe this is something you
want to invest into," he said. "We
don't know when the absolute high
will be met or when the low will be
met. But our experts believe this is
something you want to do. When it
kicked up in two weeks from 12 to
17, it was nice, but not a surprise.
It is coming more to its market
value."
Stockbrokers like Allen Olender,
who tracks Israel companies for Pru-
dential Securities, and Robert Stein-
gold, of Smith Barney Shearson,
believe people should invest in this
fund as part of an overall portfolio.
But they warn clients not to put all
their money in the fund.
"The Middle East is like the pow-
der keg of all volatile places," Mr.
Steingold said. "This fund is a high-
risk venture. So much can happen
there. You shouldn't have more than
5 percent of a portfolio in a fund like
this."
Israel is strong, Mr. Steingold
said, adding that the peace talks will
enhance its economic capacity.
"Israel stocks are undervalued,"
Mr. Steingold added. `They are just
waiting for the market to realize it."
FIF is administered by BEA As-
sociates in New York, which has a
reputation as one of the best fund
managers for emerging markets.
BEA invests the FIF in three differ-
ent areas: companies listed on
the Tel Aviv Stock Exchange (in
shekels), a group of 50 Israeli stocks
traded in New York (in dollars), and
venture capital related activities in
Israel.
This, Mr. Leventen said, keeps the
investment diverse.
In Michigan, several groups of
Jewish men and women have joined