Not Your Grandfather’s Israel Bonds

Israel (Izzy) Tapoohi became president and CEO of State of Israel Bonds
Oct. 31 after many years as a top executive of several of Israel’s major companies.
Tapoohi, 65, was born in Israel and raised in Melbourne, Australia, where he served as chairman of the local aliyah organization. He moved back to Israel with his family in 1979. Among the Israeli companies he spearheaded were Africa-Israel Investments and Bezeq, Israel’s telecommunications provider and largest corporation. He and his wife have four children and five grandchildren.

Q: Do you envision any changes in the way State of Israel Bonds functions?

A: Definitely. One of our problems has been that we have not been very good in explaining our goals and achievements as an organization. We are no longer “your grandfather’s Israel Bonds.” Just go to our website and see our Internet presence. There you can find all the different instruments we have — and we are now looking at adding more options in the future.

Who buys Israel Bonds?

I can tell you that there are plenty of retail clients, Jews and non-Jews, who buy them, as well as institutional investors and state and local governments because they are a good and prudent investment. Apart from the competitive rate of return, you have an instrument that during current tough economic times provides capital preservation. A friend called me the other day to say Israel Bonds were the best investment he has made this year because he invested $1 million and this capital sum is still intact.

The large Israel Bonds client base is a significant, truly irreplaceable asset that even the largest financial services companies would envy. For argument’s sake, were the State of Israel not to have access to this sizeable client base and then need to re-establish it, the cost of necessary interim credit lines from commercial banks would be quite substantial — and these credit lines might become unavailable in times of crises.

How do Israel Bonds compare with other bonds in terms of interest rates?

These instruments are very competitive compared to other investments you find today in the market. Israel Bonds are priced using the rates of U.S. Treasury securities as benchmarks. The spread we add to U.S. Treasuries has averaged slightly higher than 100 basis points during the last year. A factor in pricing above the U.S. Treasury is the country’s risk.

But if you look at the Israeli economy, it is one of the best in the developed world. It has a historically low unemployment of about 5 percent, a strong shekel, a positive trade balance, an anticipated budget deficit in 2011 of just over 3 percent with a growth rate of 4.8 percent. And Israel has never defaulted on payment of principal or interest.

How successful are you in getting bondholders to reinvest?

We are hoping to succeed in 2012 in getting up to 60 percent reinvestment. This organization has not always been effective in following through — calling Mr. Goldberg and saying you bought a bond five years ago that is coming due, won’t you reinvest it. To be proactive we need to call everyone continuously.

Who would be making those calls? Volunteers?

Our staff would be calling people — every bondholder whose bond is due will be called. I was chairman of Bezeq [the Israeli telecommunications company] and we used to call every client continuously until we got hold of him. The client is the king. This is a business, not a charity, and we will run it like every efficient business. 


You mentioned your website from which people can now buy Israel Bonds. How is that doing?

Within the first three and a half months of our online launch we sold almost $5 million worth of bonds, with almost 1,300 online purchases. By the end of this year, if we do it correctly, we can get 7,000 clients — many of them new — and in the following years double and triple that number.

State of Israel Bonds consistently sells at least $1 billion in bonds worldwide annually, despite economic downturns. Where does the money go?

The money is channeled to the general and technological infrastructure of Israel. It goes, for example, to government incubators that fuel the R&D of high-tech and biotech sectors of which Israel continues to be admired as a world leader. Some of our funds also go for public works projects, such as the fast train now being built from Jerusalem to Tel Aviv.

What about the emotional impact of purchasing bonds?

There is an emotional element to this investment that cannot and should not be ignored.

I believe those Middle East regimes who consider themselves still in conflict with Israel, as well as the organizations that are boycotting Israel’s goods and services, understand that with the capital-raising capabilities of the Bonds organization, Israel remains not just militarily secure, but safe and sound on the economic front as well.