The Citizens' Fund at Four Years: Framework Built, Scale Pending

Israel's sovereign wealth fund — Keren LeEzraḥei Yisra'el, the Citizens' Fund — passed its fourth operational anniversary in May 2026 with NIS 8.8 billion in cumulative deposits. The figure is small. By the same point in their operating histories, Norway's Government Pension Fund Global had passed $30 billion and the Abu Dhabi Investment Authority was managing more than $50 billion. The Citizens' Fund, measured against the international category to which it nominally belongs, is closer to the fund of a small Caribbean state than to the sovereign vehicles of mid-sized petrostates.

The question is whether Israel has built a sovereign wealth fund at scale — or only the framework for one.

The legal architecture is in place. The Knesset passed the founding legislation in July 2014. The fund's institutions — Council, Investment Committee — were established at the beginning of 2022. The Bank of Israel operates the assets through a dedicated division under the Deputy Governor. The Minister of Finance chairs the Council. Yarom Ariav chairs the Investment Committee. The mandate is long-horizon, offshore, and dollar-denominated. By every structural measure, Israel built a credible sovereign wealth fund.

What it did not build, in fifteen years, was the revenue stream that was supposed to fill it.

Why the fund is smaller than projected

The fund's founding economics rested on a single assumption: that Tamar and Leviathan, the eastern Mediterranean gas fields discovered between 2009 and 2010, would generate super-profits sufficient to capitalize a sovereign vehicle at scale within a decade. The OECD, in 2011, estimated that the fund would hold between $40 billion and $175 billion by 2040 — between 10 and 50 percent of Israeli GDP. The IMF, in its 2010 Article IV consultation, projected similar trajectories. Both forecasts assumed gas production volumes, gas prices, and tax-take rates that have not materialized.

Three things went wrong relative to projection.

First, the law set a threshold: the state could not begin investing levied super-profits until cumulative collections reached NIS 1 billion. That threshold was not crossed until 2022, four years later than the original timeline. Production from Tamar and Leviathan was slower to ramp, gas prices were lower than the planning case, and the super-profit calculation — designed to extract only the portion of partner returns above a hurdle rate — produced smaller annual collections than the founding economics assumed.

Second, no second-tier discovery has changed the calculus. Israeli gas exploration since 2010 has produced incremental finds rather than transformational ones. The Karish field has come online; smaller satellite plays have been developed; export volumes to Egypt and Jordan have grown. None of it has been at the scale required to materially shift the fund's trajectory.

Third, the levy regime itself has been a recurring political target. Proposals to raise the super-profit rate have been advanced and resisted multiple times in the Knesset; proposals to broaden the levy base to other natural resources have moved slowly. The current structure was not designed to generate the scale of inflow that the original projections implied — and political consensus to redesign it has not formed.

The result, in numbers, is the current NIS 8.8 billion. Of that total, NIS 7.3 billion is classified as final, unappealable levy payments. Collections during 2025 totaled NIS 1.3 billion, up from NIS 1.0 billion in 2024. By the end of the first quarter of 2026, total state collections had reached NIS 9.3 billion, with the residual difference pending final adjudication.

Performance and purpose

The 2025 performance illustrates the design tension between return and purpose. In U.S. dollar terms, the fund returned 18.4 percent, generating a profit of $411 million (NIS 1.38 billion). The shekel's strength against the dollar wiped out approximately NIS 1.1 billion of that profit when measured in local currency. The reported shekel return was 3.8 percent. The Investment Committee characterized the result as consistent with the fund's purpose — the offshore positioning is meant to absorb shekel strength, not to outperform it. The fund is doing what it was built to do, even if the totals remain modest.

In international context, the structural design is unusually disciplined. The Citizens' Fund is one of the few sovereign wealth funds in the world legally required to invest outside its home country and explicitly designed to dampen domestic currency strength. Its purpose is monetary, not income generation. Norway's Government Pension Fund Global, the global benchmark, holds approximately $1.5 trillion. The United Arab Emirates collectively manages more than $1.9 trillion across its emirate-level vehicles. Saudi Arabia's PIF manages more than $1 trillion. Israel's fund, at roughly $2.5 billion in current market value, sits below the vehicles of every Gulf state and most resource-economy peers.

The framework is built. The scale is not. Whether the gap closes depends almost entirely on what happens to natural-gas exploration in Israeli waters over the next decade — and to the political appetite for restructuring the levy that fills the fund.

The scale will follow the gas. Or, more accurately, it will follow the next discovery.