“Although we are an Israeli company, we have a global focus,” says Eran Peleg, chief strategist at Clarity Capital. The investment management firm, with offices in Tel Aviv and New York, was founded in 2006 by three partners – Tal Keinan, David Steinhardt, and Jay Pomrenze under the name KCPS, an acronym of the firm’s founding partners. All three have decades of experience in global financial markets. The company’s current name reflects its dedication to providing clarity for its investors.
Eran Peleg explains the company’s focus in its early years.
“Originally, the idea was to establish a firm in Israel that would be a gateway for Israeli institutions as they began investing abroad,” Peleg notes that initially, Israeli institutions were not allowed to invest abroad, and most portfolios were 100% invested in Israeli investments. Once those restrictions were lifted, the company’s founders, who had extensive global financial experience, saw this as an opportunity to help Israeli institutions start to invest and diversify portfolios globally.
Over time, Clarity Capital’s focus changed to wealth management. Today, Clarity Capital works with high net-worth families, individuals, foundations and endowments, managing their investment portfolios and advising them on wealth and risk management.
“Our expertise is global,” says Peleg, “and our clients are globally-minded individuals and families, whether they are based in Israel or elsewhere.” He adds that while most of the firms’ clients are Americans and Israelis, the company works with clients around the world, including Canadians and Europeans. “We have a global client base,” reports Peleg. He notes that most Israel-based investment firms are more focused on the local market and less on the global scene. By contrast, Clarity, with its seasoned staff of veterans of the global financial industry, is more globally oriented.
While the firm’s expertise understandably lies in the financial realm, Clarity Capital personnel must utilize an additional skill – listening – when speaking to prospective and existing clients.
“We are starting a relationship that will last many years, and we have clients who have been with us since the beginning. Usually, this relationship is multi-generational,” says Peleg. “We need to understand their circumstances. What is the investment horizon for this money? Is it five years, ten years, or fifteen years? What is the client’s tax situation? Is the client an Israeli, Canadian, or American taxpayer? Who are the family members, and what is their risk tolerance?”
Older individuals, says Peleg, might want to generate income to live off their investment portfolio and might be more conservative. Younger investors may have a long investment horizon and a greater tolerance for taking risks and not be as reliant on the money for ongoing living expenses.
Another consideration, explains David Botbol, Clarity’s chief investment officer, involves the type of investment that clients feel comfortable making.
“When we build a strategic plan for clients, we can invest in many different things. We are not limited to stocks and bonds. Since the beginning, we have had a strong belief in other types – in alternative investments,” explains Botbol. He states that there are two ways to explain the concept of alternative investments. One way is to call it by what it is not – meaning anything that is not stocks, bonds, or cash. The other way is to call it by what it actually is: real estate, private equity, hedge funds, private debt, or commodities like gold. Alternative investments, he explains, can create better returns than bonds, especially in today’s environment where interest rates and bond yields are very low – but at a lower risk than that associated with stocks.
On the other hand, alternative investments have less liquidity and cannot be sold as quickly as publicly traded securities. Botbol adds that it is important to discuss liquidity preferences with clients. Some clients may be willing to invest in non-liquid investments, such as real estate and private equity, which can generate high returns, but which can take longer to convert to cash.
“The majority of our clients,” says Botbol, “do not need as much liquidity.” He cites a recent Goldman Sachs survey of the firm’s wealthiest (family office) clients, which revealed that alternative investments make up as much as 45% of their portfolios.
As a firm with years of experience in alternative investments, Clarity Capital, says Botbol, offers distinct advantages in this area.
“In the alternative investment space, you cannot just press a button on your computer and invest into an alternative investment fund. One can purchase individual stocks and bonds or mutual funds in that way, but it is not so with alternative investments.” One must have access to the source of alternative investments, he says, and this access results only from relationships. “At Clarity Capital, we have access and relationships with those top managers that many others do not have. You have to invest in the right alternatives, and not all alternative investments are born equal.” An additional point to ponder is the size of the investment. “This is something that we bring to our clients. They can invest in a top-tier infrastructure fund with a relatively small amount of money – something they would not be able to do on their own.”
Furthermore, the significant experience of Clarity Capital in this area – in terms of its ability to perform due diligence and monitor these investments – is significant.
“You have to understand and speak to the right people and have an understanding of how these kinds of investments work. That is something that we gained after many years of experience, investing, monitoring, and exiting from these kinds of investments.”
Clarity Capital has its roots in Israel, and Eran Peleg points out that there are certain areas of investment where Israel has the upper hand.
“One area,” says Peleg, “is venture capital investing where Israel is clearly a center of tech innovation, and we see exits and unicorns every day. There are many different funds that focus on specific areas within the tech ecosystem like fintech, or cybersecurity, where Israel has specific advantages.” Another promising area of investment in Israel, says Peleg, is hedge funds. Hedge funds are relatively new in Israel. Globally, hedge funds have not performed well over the past ten years, but Israeli funds have done quite well and have outperformed their global peers recently. Peleg attributes the success of Israeli hedge funds to the reduced amount of competition in the field here, as opposed to worldwide financial markets.
“In the last five years, we have reduced our exposure to hedge funds globally, but we have increased our exposure to hedge funds locally in Israel,” he says.
Clarity Capital offers a wide range of services and products, including private wealth management, family office services, hedge funds, private debt opportunities, socially responsible investing, and institutional fund distribution. It is licensed with the US Securities and Exchange Commission, the Israel Securities Authority, the Autorité des Marchés Financiers of Quebec (Canada) and the Canadian Ontario Securities Commission.
Click here to learn more about Clarity Capital.
This article was written in cooperation with Clarity Capital.