Under the spotlight/the Israel Horizons Fund

The product: Israel Horizons Fund.

The deal: Invest a minimum of $10,000 (pounds 6,130) and get access to the growth potential of Israeli stocks. The fund is managed by Psagot, a subsidiary of Bank Leumi, one of Israel's two biggest banks. In the UK, the fund is distributed via intermediaries through Shore Capital, a London-based stockbroker.

Plus points: Investors get a rare chance to invest in a dedicated Israeli fund. Wealthy investors who want hi-tech stocks, pharmaceuticals and banks can tap into local expertise.

Some believe the Israeli stockmarket is undervalued compared to western bourses. Emerging market valuations can be evaluated using price-to-book ratios - the price of the company against the value of its assets. In Israel one pays $1.40 for $1 of assets. In the UK the amount is at least $3.50 for every $1 of assets.

The upfront charge looks reasonable. Investors pay 2.5 per cent, whereas most unit trusts take a bid/offer spread of around 5 per cent.

Drawbacks and risks: The last time a fund like this was launched was traumatic. SocGen launched an Israel fund in late 1993, when emerging markets were trendy, and gathered in tens of millions of dollars. In early 1994, Alan Greenspan, chairman of the US Federal Reserve Board, hiked interest rates, causing the dollar to appreciate and worldwide markets to plummet. There was little SocGen could do to avoid an awful investment record in its fund.

The timing of this launch may be less unfortunate. But there is currency risk (the fund is denominated in dollars). Annual charges are higher than some other emerging market funds, at 2 per cent a year.

Verdict: Fine, but strictly for the adventurous, well-off type.

Marks out of five: Three and a half (bearing in mind the above).

Andrew Verity