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10 Questions

with Jiří Musil and Raphael Kassin
10 Questions | Search restaurants | Archives

July 2nd, 2008 issue

COURTESY PHOTO
Musil notes that demand remains for real estate products.
COURTESY PHOTO
Kassin warns against basing investment decisions on emotions.
THE MUSIL and KASSIN FILES



Name: Jiří Musil
Job title: Director of distribution for asset management, Credit Suisse ČR
Nationality: Czech
Previous position: Senior client relationship manager, BNP Paribas Asset Management

Name: Raphael Kassin
Job title: Head of emerging markets fixed income, Credit Suisse Asset Management
Nationality: Brazilian
Previous position: Head of emerging markets fixed income, ABN AMRO Asset Management
The financial services firm Credit Suisse has announced plans to expand its presence in the Czech Republic, increasing its focus on retail clients and offering more of its global mutual funds in Czech crowns. Two of the bank’s asset management experts, Jiří Musil and Raphael Kassin, talk to The Prague Post about risk perception, Argentina and the need to stay disciplined.
? Do Czech residents prefer to invest in mutual funds that are based in crowns, or are they open to investing in multiple denominations?
Jiří Musil: Czechs are aware of what’s happening on the foreign exchange market and react to the movement of the crown. In general, they react more sensitively if they have invested in euros and then the Czech crown appreciates than if they invest in crowns and the currency depreciates. This asymmetric risk perception is reflected in the sales of mutual funds.
? How have your sales shifted?
JM: Our sales figures show that in the past few years mutual funds in crowns were preferred to funds in foreign currencies. Having said that, this doesn’t mean that Czechs are not interested in investing in international products where the currency risk is hedged. We see similar patterns emerging in other countries like Poland and Hungary.
? Following the real estate bubbles that have popped in various Western markets, is housing still considered a safe investment?
JM: Real estate investments are most suitable for portfolio diversification purposes, but within the asset class achieving a good mix geographically and by type of investment can also bring benefits. The diversification benefits of real estate investments are a key argument in their favor. This means that incorporating real estate investments into a securities portfolio can reduce risk without cutting the portfolio’s return to the same extent. This has been increasingly recognized in recent years, driving up demand for domestic and international real estate products.
? In general, do Czech investors play it safer than their counterparts in Western Europe or do they prefer riskier investments?
JM: It is impossible to generalize. But, on the whole, Czechs invest relatively conservatively, but at the same time are pragmatic in their approach and aware of the need for diversification. This is compared with Poles or Slovaks, who tend to take bigger risks when investing.
? Financial speculators have been faulted for allegedly investing in oil and food commodities, which pushes up prices. What role do you think investors have played in these increases?
JM: Over the past 12 months, the driver of commodity prices has been less about supply and demand and more about the financial markets. Since the beginning of the credit crunch last summer, conditions in the financial markets have been very benign for commodities. Falling interest rates have been reducing the opportunity cost of holding nonyielding assets such as commodities, while rising inflation expectations have led to an increased demand for physical assets. At the same time, a weaker dollar has also helped push prices higher. These favorable conditions led to a broad-based rally in commodity prices.
? Raphael, you head Credit Suisse’s fixed-income investments into emerging markets. What countries do you consider most attractive at the moment?
Raphael Kassin: We have a diversified spread of countries in the current portfolio. In Latin America we have Argentina, Venezuela, Ecuador and Brazil — four interesting countries. Then we have Turkey, but nothing else within Eastern Europe, and we have no exposure to Russia at the present moment. In Asia, we have the Philippines and Indonesia, and in Africa we are invested in Ghana and Gabon. We have a small exposure to Mexico, the Seychelles and a few other countries.
? What have been your best investment decisions?
RK: I’m fortunate in that there have been many good investment decisions. I bought Ecuador in 2000, and it provided a fantastic return. It was constructing oil pipelines, and that was a success. I also bought Russia when Yeltsin was handing over power to Putin. I bought a lot of Russia, as I saw that as a change and I knew that it would work well for the country.
? What calls do you now regret?
RK: My worst investment was in fact also one of my best, but at different times: Argentina. I didn’t buy Russia when it defaulted in 1998, so I was saved from that, which was a good result. But I bought Argentina in November 2001, and it defaulted that December. I bought at quite a low level, prices were going down and I didn’t buy that much. It was a bad decision at the time, but I looked at the investment carefully and rather than selling at the bottom of the market I held onto it and made money when the country restructured. It then became my best investment — the returns were fantastic. It is important not to hold negative feelings about a country.
? What’s your recommendation for individual investors in times when markets are volatile, like they are today?
RK: I would say the best thing for individual investors is to separate emotion from investment decisions. It is important to think about value and only invest what you can afford to lose. There is always a risk involved when you are emotionally involved in investment decisions. Let’s say you think the price of oranges is going to go up because you like oranges; maybe not everyone else does, however, so that is a problem.
? What’s the most difficult lesson for investors to learn?
RK: A lot of investors stay in positions for too long. Discipline is important — buy because you think an investment is cheap on a historical basis, bide your time, have patience, and when you reach your target return, be disciplined and get out. But only invest what you can comfortably lose. Don’t bet your house; bet your bicycle, say, because without the bicycle you can still walk. And as always, when looking at your entire portfolio, diversification is key.
Want your manager to answer our 10 Questions? Contact Markéta Hulpachová at mhulpachova@praguepost.com


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