Moshe Dayan is an Israeli general and government minister who died in 1981.
A photo of Dayan popped up in the Facebook feeds of thousands of prospects in the weeks leading up to the Jewish New Year, Sept. 24-25. Dayan, a general and government minister who died in 1981, stands in front of a banner advertising Israel Bonds, a supplement to government debt which helps the country pay for everything from roads and bridges to West Bank barrier walls and the Iron Dome missile-defense system.
It’s part of a marketing campaign hatched by an Australian who
immigrated to Israel in 1979, Israel “Izzy” Tapoohi, 68, the brokerage’s chief executive officer. He’s served as chairman of Israel’s largest telecommunications company and as economic adviser to Prime Minister Benjamin Netanyahu, whose government appointed him in 2011 to lead the Development Corp., the underwriter of Israel bonds. At a time when the war in Gaza hurt Israel’s image around the world, Tapoohi is doing all he can to strengthen the country’s ties, both financial and spiritual, with American Jews.
Israel “Izzy” Tapoohi has used technology to increase annual U.S. sales by 74 percent... Read More
Maccabee Bonds
The brokerage has raised more than $37 billion worldwide since its creation in 1951, selling securities with names like “Mazel Tov” and “Maccabee” bonds. Once a standard Bar or Bat Mitzvah gift, Israel Bonds have about 500,000 holders. The securities have the same credit risk as sovereign debt that Israel sells in global capital markets and pay a premium because buyers can’t sell them.A five-year “Jubilee” bond offers a rate of 2.64 percent, 77 basis points, or 0.77 percentage point, more than the 1.87 percent yield on Israel’s tradable dollar bonds due in 2019, and 0.99 percentage point more than similar-maturity U.S. Treasuries (USGG5YR) through yesterday. Five-year dollar bonds from South Korea, which has the same credit rating as Israel’s, yield about 2 percent. Israel’s benchmark bond, due in March 2024, yielded 2.2 percent at 11:05 a.m. in Tel Aviv today.
Tapoohi has used technology to increase annual U.S. sales by 74 percent since taking over three years ago, to a record $1.1 billion last year, while cutting costs almost in half. He’s invested in digital advertising to promote online sales and hired a management consultant to scrutinize pay -- his sales force now earns more on commissions and less in base salaries.
Automated Reminder
He’s taken over operations in Europe, South America and Canada from the direct management of the Israeli government, and upgraded the brokerage’s computer system so that when a potential investor in, say, Milwaukee contacts the national call center in New York, a local sales representative gets an automated reminder on her desktop the next morning to follow-up.He said the brokerage is also more successful on maturing bonds, resulting in a reinvestment rate that’s about 60 percent, from 20 percent in 2010.
“I call Mr. Cohen a month before, I say, ‘Hi, this is Israel Bonds, I understand you’ve got a bond coming due. We’ve got some lovely papers available,’” Tapoohi said. “Before the Fidelitys of this world grab him and take his $50,000 from him.”
Israel’s financial independence and its changing relationship with American Jews is reflected in the rates on the bonds. Until the 1990s, the debt offered an interest rate of about 4 percent on fixed-rate notes, even at a time when the Federal Reserve jacked up borrowing costs to as much as 20 percent in the 1980s. Now, Tapoohi said, customers negotiate with his salesmen for better rates.
Rainy Day
Critics of Israel Bonds argue it has become a superfluous legacy institution that portrays Israel as a charity case or, worse, is an unnecessary financial burden on the government because of the higher rates it offers.“We’re giving the bondholders the impression that they’re helping us, while we’re giving them the best interest rate around,” Yossi Beilin, a former deputy minister of finance for Israel’s Labour Party, said in a phone interview from Tel Aviv. “Officially the need is that we keep it for a rainy day when no bank in the world will give us money, and then only our brethren Jews will buy bonds. If, God forbid, this is the scenario, the bonds will not save us.”
Economic Sovereignty
From its inception three years after Israel was created in 1948, the bond-selling program has sought to strike a balance between charity and investment. For a fledgling nation, struggling to house hundreds of thousands of European refugees, selling bonds was both a necessity and an expression of economic sovereignty. For American Jews, lending money to Israel, a war-torn country on the verge of bankruptcy, was an act of charity and loyalty.“If you were an investor in 1951 looking for a place to put your money, Israel would not even be at the end of your list,” said Dan Lainer-Vos, a professor of sociology at the University of Southern California in Los Angeles and author of “Sinews of the Nation,” which chronicles the history of Zionist bonds in the U.S. “They quickly realized they had to make it some kind of hybrid, because if you tried to sell it on Wall Street, you’d spend all day and get nothing. Nobody would invest in you.”
The goal now is to sell the strength of the Israeli economy and dispense once and for all with the idea of Israel Bonds as a charity, Tapoohi said.
“It’s an economic narrative that we’re giving today, and not a geopolitical one,” he said.
Gaza War
Still, during the 50 days of war between Israel and Hamas in July and August, the Development Corp. sold $270 million of bonds, compared with an average of $150 million during July and August from 2010 to 2013, the Israel Bonds organization said.About 2,100 Palestinians in the Gaza Strip and 70 Israelis died during the war, which began after the killing of three kidnapped Israeli teenagers in June.
The Development Corp. said the bonds have become a rebuttal to the Boycott, Divestment and Sanctions movement, which was started in 2005 to pressure Israel to recognize the rights of Palestinians and end the occupation of Arab lands, according to its website.
While American Jews’ emotional attachment to Israel hasn’t wavered in the past 10 years, just 38 percent said the Israeli government was making a “sincere” effort to establish peace and only 17 percent said they thought continued settlement building on the West Bank of the Jordan River helpful to Israel’s security, according to a 2013 study by the Pew Research Center’s Religion & Public Life Project.
Pension Funds
During the Gaza war, 42 percent of Americans said Israel’s actions against Hamas were justified. That number dropped to 25 percent among Americans between the ages of 18 and 29, according to a Gallup poll taken July 22-23. The British parliament passed a non-binding resolution Oct. 13 to recognize a Palestinian state. Sweden also formally recognized Palestine last month.Dayan, who lost his left eye to a sniper, served as defense minister during the Six-Day War. He came to symbolize Israel’s victory over its neighbors in that 1967 conflict.
While Israel has grown to be a $291 billion economy with a better debt-to-domestic-production ratio than the U.S., it’s still expanding the borrowing program to record levels and finding buyers that include more than 80 U.S. state and municipal pension and treasury funds.
Engage Diaspora
“It’s an attractive return, more attractive than many other fixed-income opportunities,” said Thomas DiNapoli, comptroller of New York’s $180 billion state pension fund, which has been buying the bonds since the late 1990s. “New York feels a strong connection to the state of Israel, so an investment like this has a double bottom line.”Several countries, including India and Sri Lanka, have sold “diaspora bonds,” though none as successfully as Israel, which is unique in setting up a dedicated organization run by people outside the country, according to Dilip Ratha, an economist who studies migration and remittances at the World Bank in Washington.
“More than money now, I think it’s really to deepen contact and stay engaged with the diaspora,” Ratha said in a phone interview. “The ability to tap the diaspora for financial support, as well as political support, is a factor mentioned by rating agencies as a reason for giving a higher sovereign rating to Israel.” Israel bonds aren’t rated.
Underwriting Fees
Tapoohi said the underwriting fees he charges the Israeli government, 2.8 percent of sales, are better than the rate a Wall Street firm would require. Plus, he said he has bigger dreams.Born in Israel after his father fled Eastern Europe before World War II, Tapoohi grew up in Melbourne. His father was a rabbi, and Tapoohi became a leader of the Zionist movement in New South Wales before returning to Israel at the age of 33.
He’s sat on the board of 23 Israeli companies, according to his resume, including a stint as chairman of Bezeq Israeli Telecommunication Corp. (BEZQ) Ltd., Israel’s largest telecommunications company, and Africa Israel Investments Ltd. (AFIL), the real estate company controlled by billionaire Lev Leviev. He was also CEO of a high-tech investments consultancy called InQSOFT Ltd. in the early 2000s. Tapoohi has also worked for Netanyahu during both of the Likud Party leader’s tenures as prime minister.
Once he’s done wringing efficiencies out of the organization, he said he wants to expand into other investments, such as seed funds for Israeli technology startups and affordable housing finance.
“We can utilize this infrastructure for selling many other Israeli papers in the long run,” Tapoohi said. “Half a million bondholders, that’s a really good insurance premium.”
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