Karnot Sal / Israeli Index-Tracking ETFs

Karnot sal (Hebrew: קרנות סל — 'basket funds') are Israeli passive investment vehicles that track domestic and international indices, traded on the Tel Aviv Stock Exchange. Unlike US ETFs (which use a creation/redemption mechanism with authorized participants), Israeli karnot sal operate as unit trusts with daily NAV published by the TASE — a structural difference that affects liquidity and tracking error. The Israeli ETF market has grown dramatically following the 2005 Bachar Reform, which broke the banks' grip on savings management and created a competitive passive investment industry. Major Israeli ETF providers: Meitav (distributes iShares products), Halman-Aldubi, BlackRock Israel, Trackrs, Psagot (absorbed by Meitav Dash). Key index products: TASE TA-35 trackers, TA-125 trackers, Tel Bond-60 corporate bond trackers, and international equity trackers covering S&P 500, MSCI World, and Nasdaq-100. Tax treatment for Israeli residents: (1) Capital gains on karnot sal traded on TASE are taxed at 25% flat; (2) Dividends from karnot sal are subject to 25% withholding tax at source — the TASE broker handles withholding automatically; (3) Foreign ETFs purchased through Israeli brokers (e.g., BlackRock iShares MSCI World via an Israeli account) receive the same tax treatment but may generate more complex annual tax reporting. The Bank of Israel's mandatory pension and provident fund regulations pushed keren pensia and gemel fund managers toward passive karnot sal mandates — by 2023, passive management accounted for over 40% of Israeli institutional assets under management, creating a ₪400B+ domestic passive industry. For retail investors, karnot sal offer the cheapest path to TASE and global equity exposure: TA-35 trackers charge 0.1–0.2% annually, S&P 500 trackers 0.1–0.3%. The main risk for domestic TASE trackers is concentration — the TA-35 is dominated by five banking groups and a handful of tech names, so a TASE ETF is effectively a bet on Israeli banks, real estate, and dual-listed tech companies.

An Israeli engineer earning ₪45,000/month in high-tech builds a tax-efficient portfolio: employer keren pensia + hishtalmut are mandatory and tax-deferred. Discretionary savings go into karnot sal: 50% in a MSCI World tracker (global diversification), 30% in a TA-35 tracker (domestic equity), 20% in a Tel Bond-60 tracker (investment-grade Israeli corporate bonds). The karnot sal are held in a regular brokerage account — gains taxed at 25% flat, dividends withheld at source automatically. No active stock picking, no advisor fees, no management charges beyond the 0.1–0.3% ETF expense ratios.