The Tel Aviv Stock Exchange (TASE: TASE) published for public comments a proposal to recognize hedge fund holdings as part of companies' free float calculations, aligning with international market practices.
As part of the amendment, the holdings of a hedge fund which holds up to 15% of the share capital in a company and have no right to appoint a director or a representative in the company's board, will be recognized as free float holdings.
As of today, TASE guidelines’ does not recognize the holdings of hedge funds as free float holdings. Consequently, hedge fund that holds 5% or more of a company's share capital is considered an interested party, what could adversely affect the company and therefore prevented the hedge funds, in some cases from increasing their investments in the companies they believed in.
A hedge fund that would like its holdings to be classified as free float holdings is required to declare, by December 1 of each year, that it complies with the definition of a hedge fund, as prescribed in the Regulations promulgated under the Joint Investments in Trust Law, and manages the funds of 20 investors minimum.
The hedge funds, similar to institutional investors, manage monies on behalf of others and significantly contribute to the capital market. The proposed amendment is a significant step in the development of the Israeli capital market. The recognition of the hedge funds holdings as a free float will further enhance liquidity on the capital market, increase the free float holdings in companies for the purpose of inclusion in TASE indices, and enable the hedge funds to act more efficiently in the capital market.
