With banking interest rates at a low and Czechs getting wealthier, more people are looking for alternative investment opportunities, including mutual funds. Jirí Musil, a mutual fund relationship manager with BNP Paribas Asset Management (BNP PAM), talks with The Prague Post about the challenge of investing in mutual funds. He also offers some hot tips for investors about which markets look the most promising.

How much money should people have in their savings accounts in order to start thinking about investing in mutual funds?

We do not set any minimum investments for our clients. Over the past few years, we've successfully developed investment plans that enable clients to make monthly deposits of just a few hundred crowns so that they can use our funds for creating long-term wealth.

n What should be the key criteria for investors in their decision-making?

First of all, everyone needs to consider his or her individual situation. It is essential to define the aim of a particular investment, to set an investment horizon and to consider volume of other assets and how much risk they want to take on. The challenge for investors is recognizing acceptable levels of risk and looking for investments with the highest possible yield.

Ă What are the guarantees for clients that ensure they will not lose the money they've invested?

BNP PAM in the Czech Republic offers mutual funds that are in compliance with EU norms. In such funds, the assets of the stakeholders and fund manager are divided. All funds have been diversified against risk. Last but not least, assets are being stored at independent financial institutions.

Ő What strategy should an investor follow after making the decision to invest money in mutual funds?

One should follow a preset risk strategy. Making a good first decision is essential. It is also important not to panic in times of market volatility because most investments are usually long-term, so immediate declines in prices are insignificant. On the other hand, another extreme that one should avoid is taking on more risk at a time when the market is growing. It often happens in such cases that investors are buying when prices are high and selling when they are low, which is ineffective.

ΠWhat funds does BNP PAM offer in the Czech Republic?

We've got more than 70 PARVEST funds [sub-funds], which invest in different assets ranging from financial instruments to stocks. We also invest in different markets outside of Europe — be it the United States, Japan or various emerging markets where BNP PAM has a strong position.

œ Which markets have the most promising potential for investors?

I've already pointed out that it is quite important for everyone to first assess their own risk capabilities. If I take a look five or 10 years from now, I think developing markets such as India, China and Latin America have big investment potential. Those are fast-developing markets that are no longer dependent on exports to developed countries, and they are joining in mutual business relationships as well. New trends will lead to the development of new sectors in which developing countries have a chance to dominate.

– How can you guarantee the performance of your funds in developing markets? Aren't fund managers limited by insufficient knowledge of those environments?

Such a presumption is correct. Still, BNP PAM enjoys a significant advantage over competitors thanks to its participation with local investment companies that manage its funds in those markets. Since those investment companies are local leaders, their knowledge of their markets is obviously good. BNP PAM holds majority stakes in those companies, so it can effectively control them and can issue guarantees to investors.

— Traveling throughout Central Europe is part of your job. Are there any major differences among investors in different countries?

I work within the Central European team, and we service countries from Austria to Russia. In Austria, we're focusing on an investment scheme that is based on selling sub-funds to funds. This scheme is not very developed in the Czech Republic or Hungary, where the main focus is on external distribution and direct institutional sale. In other countries — such as Slovakia — we focus on particular investment projects.

" What about your job has made you happiest?

I'm glad that the volume of assets that we manage for our clients is relatively big and is rising. Our long-term goal is to further expand the chain of external distributors and to provide them with marketing support.

" By the way, who is the asset manager at your home?

It depends on how you answer the question. It is always my wife who decides which fridge or washing machine to buy. But it is me who cares about how to save money for those purchases, or, in other words, I decide about how much money we need to put into Indian or Chinese funds in order to generate the savings.