Approved: A New Framework for “Alternative” Mutual Funds

On July 28, 2026, the Israeli Parliament (the Knesset) approved an amendment to the Israeli Joint Investments in Trust Law, 1994 (the “Amendment” and the “Funds Law“, respectively).

The Amendment creates a new framework for the establishment of registered mutual funds that invest in “alternative” asset classes and employ hedging strategies. Accordingly, it permits local mutual fund managers to establish funds that invest in assets other than tradable securities, such as private equity, debt, loans, real estate, and digital assets (subject to detailed restrictions to be prescribed by the ISA).

1. For investors, the Amendment opens up the possibility of investing in alternative assets through funds that are subject to the strict supervision of the Israel Securities Authority (the “ISA“). Until now, investment in such assets was available to retail investors only through direct investment (such as the purchase of real estate assets or cryptocurrencies), or through private investment funds that are not supervised and offer very limited access to retail investors.
2. For Israeli-licensed mutual fund managers, the Amendment entails an opportunity to diversify the product offering, and in particular, to offer, for the first time, retail products that provide exposure to alternative asset classes (which were historically dominated by managers of private funds).
3. For global asset managers, the Amendment could serve as an early signal of an upcoming opportunity. Currently, global managers are able to passport UCITS and 40 Act funds into Israel under a “dual-registration” relief (which essentially permits the offering of such funds to retail investors based on their home-country regulation).
   The Amendment broadens the definition of “Global Fund” to include funds that invest in all types of assets and includes other references to “Global Funds that are similar in nature to [local] Alternative Mutual Funds”.  This could be an early indication of the legislator’s intention to permit the “passporting” of global funds that invest in alternative assets (such as European ELTIF funds, or funds that invest in digital assets). Interestingly, the inspiration and basis for the Amendment was largely the European ELTIF regime.
   That said, for this opportunity to materialize in practice, the ISA would have to broaden the list of eligible EU/US regimes under the Global Funds Regulations.
   On the other hand, the broadening of the “Global Fund” definition has an adverse effect as well – it subjects private global funds of all types (such as real estate funds) to a maximum of 50 retail shareholders at any given moment.
4. For alternative asset managers and other players in the alternative assets field, the Amendment opens the door for new collaborations with Israeli-licensed mutual fund managers.
5. The Amendment creates new sources of funding for businesses operating in alternative asset fields (such as real estate developers and private companies).

We would be pleased to assist you in exploring the opportunities and implications arising from the Amendment and in preparing for its entry into force.

This update presents only the main points of the Amendment, is not exhaustive, and does not constitute legal advice.

Sincerely,

Securities and Capital Markets Regulatory Team in the Banking and Finance Department

Herzog Fox & Neeman