Since the beginning of February, the share of Altshuler Shaham Investment House has jumped (
Altshuler Shaham Camel
+ 0.92%
Base:2,068
opening:2,094
High:2,101
low:2,072
change:431,781
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) By about 20% for a record price of NIS 21, which expresses a value of NIS 4 billion. This is because Altshuler Shaham is closer than ever to taking over the Psagot investment house – at a value of about NIS 1 billion (Altshuler intends to stay only with the provident and pension funds; the mutual funds will be sold to others).
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Altshuler Shaham have to go through a big hurdle and they seem to be able to convince that it is not really a hurdle. Well done to them – but it would be a goal in itself if the regulators approved the deal. On the way in Altshuler “step” even further on the battered peaks. Altshuler Shaham’s argument is that the acquisition of Psagot does not affect competition in the provident and pension market. So it is true that Psagot has NIS 53 billion of managed funds and together with the assets managed by Altshuler Shaham it is close to NIS 200 billion, but “Who are Psagot? A bloody body that is not really competitive.” Beyond that, when looking at the segment of provident funds and study funds, Altshuler Shaham does not cross the regulatory barrier of up to 15% of total pension savings. They are close, but do not pass. Another argument of theirs is that there are pension giants like Menorah and Migdal that are larger in scale than Altshuler Shaham.
With these arguments in Altshuler Shaham are trying to legitimize the purchase. The acquisition will increase the volume of Altshuler’s assets by about 30% (rough calculation) and the profit much more – after all, most of the costs are fixed, so most of the management fees that will flow from the new assets (Psagot’s provident funds) will flow to the bottom line.. This is the reason why the Altshuler Shaham share has been soaring in recent days, and this is exactly the reason that proves that Altshuler’s arguments are incorrect. Altshuler becomes very powerful, much more profitable, and it widens the gap between it and all the others. Competition is measured not only in the overall market volume, but also in certain categories, trend, control and dominance in parallel and ancillary products, as well as in profits. There is no arguing that the acquisition of Psagot makes Altshuler’s monster in the area of pension savings bigger – and it’s quite clear that the consumer does not benefit from it.
Despite its poor decade, Psagot is a significant body in the field – and its acquisition greatly hurts competition because it will bring a significant player out of the market. The acquisition transfers huge profits to a leading entity, profits that strengthen it vis-à-vis the other entities – especially the small and medium-sized entities, which have low profitability.
The acquisition will position Altshuler as a giant in its field, it will turn the fastest-growing sub-markets – investment provident funds and study funds – into being under almost complete control of Altshuler Shaham. The argument that peaks are non-competitive is irrelevant – one has to wait for it to be bought by a competitive body. The argument that it is not worth selling to investment funds from abroad because of what happened to Psagot under Apax’s control is irrelevant. There may be entities that will be able to compete. The argument that only a strategic entity will be willing and able to acquire Psagot Altshuler the giant Shaham, it could be a mediocre player, but at the moment there is no mediocre player who wants to buy Psagot. But we have to wait. : This is “Altshuler Shaham and the rest of the table”.
So: the commissioner of competition and the commissioner of the capital and insurance market – Michal Halperin and Moshe Barkat, do not fall into the trap. Against the arguments that will come from Altshuler Shaham, you have one big argument – the market is not stupid and the market knows that such a merger will increase profits by many tens of percent and affect the balance in the pension vaccine market.
Altshuler’s value soared 20% in a week and a half – the market knows that profits will skyrocket. The slice of Altshuler that is hot in the profit pie in the field of provident funds and study funds will be huge – it will be larger than the slice of Altshuler and Psagot before the deal. This is the opposite of what it should be. This further reduces this body’s motivation to compete and lower management fees / fees. He buys a competitor instead of competing and lowering management fees.
Think about it – buying peaks basically eliminates Altshuler’s need to compete. For them, they invest a lump sum and buy customers instead of lowering management fees and competing and gaining customers. Which serious regulator will approve a purchase when it is clear to everyone that the motivation for competition and lowering management fees is declining?
Altshuler’s additional profits are management fees in provident funds and public pension funds. Therefore you need to strengthen other players and thus the management fee will go down – for the benefit of consumers! If you let Altshuler buy Psagot, the management fee will not go down – and competition will weaken. The question here is very simple – do the competition commissioner and the capital market commissioner work for the public or for Altshuler Shaham?
Peaks is indeed a body in a crash. Psagot leads the redemptions both in the field of funds and in the field of provident funds. The fall of the peaks is the mirror image of Altshuler Shaham.
The decade of Altshuler Shaham Willin Lapidot
In the last decade, two giants have emerged in the field of financial management – Altshuler Shaham and Willin Lapidot. Both reached a value of billions – Altshuler Shaham Provident Funds is traded at NIS 4 billion and the whole company is probably worth over NIS 5 billion. Yellin Lapidot is roughly worth over NIS 2 billion. The good investment managers of these entities (owners) along with marketing and motivation have been able to generate returns for the public and grow in the crowded money management industry.
They grew up because they were good, and they created very significant value for their owners at the expense of dormant / weak investment managers elsewhere. Faced with their incredible rise, Psagot Investment House, which was a leader a decade ago, is losing market share and suffering from redemptions due to disappointing returns. As stated – the increase in the value of Altshuler Shaham Willin Lapidot is the mirror image of the loss of value of Psagot.
Compared to the volume of assets of about NIS 140 billion in the provident funds and study funds of Altshuler Shaham and about NIS 70 billion in Bilin Lapidot – an increase of more than 10 times in a decade, Peaks did not grow. Despite current deposits, despite a positive return resulting from vibrant financial marketers, despite being a market leader.
In the end, this failure belongs to the investment managers, the company’s managers and the controlling owner – Apax, which is managed by Zehavit Cohen. Recently, Reuven Kaplan, CEO of Psagot, resigned after a year in office. Cohen’s problem is the inability to find a manager who will change the DNA of the peaks and shoot the returns. Or it does not interest her at all, especially not now – now she’s busy selling the company.