N.Y. Investing In Israel

With tourism to Israel and investments in industry there only a fraction of what they once were, New York State Comptroller Alan Hevesi is joining with other investors in giving the Israeli economy a boost through an infusion of $250 million.
Hevesi disclosed at a meeting last week of the Conference of Presidents of Major American Jewish Organizations that he is investing $100 million of the state Common Retirement Fund in a new private equity fund that will invest in Israeli industries with a proven track record. The $100 million will anchor the $250 million Markstone Capital Partners, a fund founded by Elliott Broidy of Los Angeles.
"This is the largest fund of its kind for the State of Israel," Hevesi said in an interview after the meeting. "I think we will be filling a substantial vacuum.
"My first obligation is to make money for the pension fund," he stressed, "and to be able to do that and to make money for Israel is an enormous satisfaction for me."
Hevesi is the sole trustee of the state’s $100 billion Common Retirement Fund, the second largest in the United States after California’s $120 billion fund. There are 945,000 participants in the fund, including 315,000 retirees. The rest are state and local government employees, including those in every school district, town and village in the system. Only New York City employees are exempt.
"We are going to invest in infrastructure: road building, housing, communications," Hevesi said. "These are the industries that are ongoing, have a cash flow, are producing a profit and need investment to expand and to grow. … Our goal is to receive a market rate return which will be double digit."
Broidy said in a phone interview that the fund has hired Ron Lubash, who formerly headed the Lehman Brothers’ office in Israel, and Amir Kess, formerly of the Arison Investment Group (one of Israelís largest), to serve as the management team and to be based in Tel Aviv.
"We’re looking at the best companies that are in the old economy, such as real estate, retail: almost anything except high-tech," Broidy said. "We’ll be investing in private companies as well as public companies. All of the companies have strong management and a strong market share.
"We have identified many high-quality opportunities," he said. "We would become a shareholder [in public companies] and buy a position in private companies: up to buying the company."
Hevesi said the Markstone fund, named after David ‘Mickey Stone’ Marcus, who commanded troops in the battle for Jerusalem in 1948 and was killed accidentally by an Israeli sentry, is looking for private and institutional investors. The fund is speaking with institutional investors and pension fund managers in California and New York City, the comptroller said, and expects to assemble all $250 million soon.
"If it goes well, we may repeat with another $100 million" in another $250 million fund, Hevesi said, adding that he has invested pension fund money all over the world.
"We met six weeks ago in the South African Embassy in Washington and they want us to prepare a program for South Africa," he said.
"We intend to be successful [in Israel]," Hevesi added. "The Israeli government is encouraging this kind of investment. Presuming there is peace, we will be in a position to invest in the peace process in the long term."
Zohar Peri, Israel’s economic minister for North America, said such an investment is a sound idea because "prices in Israel are now much less than their real value, and it’s clear that prices will pick up later."
"I’m seeing a lot of people coming and investing in real estate and buying hotels," he said. "The stock exchange in Israel is hiking up, and people believe in the new economic policy and see that both sides [Israelis and Palestinians] are ready for a [peace] arrangement."