The founder of two Israel-oriented exchange-traded funds (ETFs) argued that “cutting-edge” Israeli companies that are “leading the world in some of the most transformative technologies” remain “underowned and underdiscovered,” in an interview Thursday.

Steven Schoenfeld, founder of Blue Star Indexes and creator of BIGI and BIGITech stock indexes, told ETF.com that contrary to popular belief, Israel’s economic fortunes are not tied to the risks inherent in being located in the Middle East. However, he pointed out other factors that prevent Israeli companies from getting their due from investors.

“The big moves—up or down—in the Israeli market are global economic,” Schoenfeld said. “The tech meltdown in 2000/2001 affected Israel a lot more than the Gulf War of 2003. When you had the global financial crisis in 2008/09, that affected Israel more than the war with Hamas in 2008/09.”

Israeli tech companies are generally immune to uncertainties in the Middle East, he added, because “Israel’s tech sector exports by basically clicking a mouse.”

However, some of Israel’s top tech companies still remain surprisingly unrecognized by investors. Schoenfeld suggested that the problem stems from the fact that these cutting-edge Israeli tech firms are “‘Israel inside.'”

“For example, people talk about autonomous vehicles, and those cars will be BMW, Volkswagen; they’ll be the name brands we know. But what’s the technology that’s going to be inside? It’s going to be Mobileye. And many people may not know the Mobileye name, but it’s there,” he explained.

Another example is AmDocs, a firm that creates billing technology used by leading cell phone companies. While few may know much about AmDocs, “AT&T and Vodafone and T-Mobile and Sprint and Verizon, as well as the biggest cellphone operators in Brazil and in Russia and in Mexico” all rely on it.

A second factor that keeps some Israeli tech firms from getting the investor attention they deserve is that technology stocks are often narrowly defined. On the other hand, ITEQ, a fund based on the BIGITech index, defines “tech more broadly because Israel is also a leader in medical technology, in biotech, in clean and renewable energy, in sustainable agriculture and other things like that. We made it so that even though Israel’s a niche, it’s actually very broad and very diversified in how we define tech,” Schoenfeld said.

Israeli tech stocks also often fall into the cracks of how indexes are compiled. Mobileye, for example, isn’t in any NASDAQ indexes where innovative tech stocks are often found because it is listed on the New York Stock Exchange. “And because many of these companies aren’t American, even if they’re listed on Nasdaq, they don’t get into the S&P tech sector indexes,” Schoenfeld added.

The rationale for the U.S.-listed ITEQ ETF is to give exposure to companies like Mobileye, which helps investors take advantage of Israel’s “well-known technology prowess,” he continued.

Schoenfeld observed that the main impediment for some of Israel’s most innovative tech companies is a “lack of awareness.” Even within Israel, many top tech firms are not listed on the Tel Aviv exchange, so they’re not included in local indexes. Yet Israeli institutional investors are starting to become more aware of the great performance of local businesses, Schoenfeld noted, and are increasingly finding ways to invest in them.

[Photo: Blue Star Indexes / YouTube ]