2022 was a tough year for the equity markets, but the situation has turned around and the markets are heading higher.

Hannes Cizek, who recently became the new CEO of Raiffeisen KAG, discusses his plans and market outlook in this interview with the daily newspaper Kurier.

KURIER: You took over the helm of Raiffeisen KAG just a few weeks ago. What are your plans for the company?

Hannes Cizek: It’s a real pleasure to be in charge of such a successful and professional team since April of this year. Naturally, as one of Austria’s largest fund companies, Raiffeisen KAG has always had to follow and incorporate new developments and trends, both in terms of investments and sales activities. This is the only way we can maintain our high standards and meet our clients’ needs. My goal is to leverage additional potential in sales. On the one hand, in Austria, where capital market investments still don’t get the respect they deserve, in my opinion.

How do you want increase (Austrian) retail clients interest in the capital market?

We will be launching financial literacy campaigns for customers to appeal to new target groups, and we will also put stronger emphasis on education and advanced training for advisors, because it has been proven that customer meetings are an extremely important part of sales. On the other hand, there is also massive potential for fund investments in the broader neighbourhood of our home market of Central and Eastern Europe.

One big issue in the fund industry is that more and more customers are going with the significantly cheaper ETFs and are less interested in managed funds. How do you intend to address this trend?

First of all, in relation to the costs: these are not really that low for ETFs compared to what investors think, keeping in mind the buy-sell spread. In the big picture, we also believe that passive financial products like ETFs certainly have a justified place and we employ them in our funds of funds as well. That said, and here’s where we have an advantage as active managers, we also see another trend: namely that more and more investors are paying very close attention to investing their capital with responsibility, i.e. in a sustainable manner. For this group, it is important that their investment is guided by fund experts and that companies or issuers can be removed quickly from the portfolio if environmental or social criteria are violated. Investors who put their capital in our actively managed funds can be sure that this is the case. We take a very strict sustainability approach, as confirmed by the numerous awards from external institutions.

What risks and opportunities do you think artificial intelligence (AI) has for the investment industry?

In relation to sales activities, we are of course taking a very careful look at this issue. We are following current developments, as well as the opportunities that AI offers. AI solutions are an interesting option in the fields of risk and product management in particular, as well as in sales and service. We are looking into this. The other side of the coin is that artificial intelligence is naturally a very important investment topic in its own right. In this respect, however, the job is to carefully analyse the individual securities in terms of ESG considerations.

The Austrian fund volume of asset management companies rose by 14 per cent in 2022 to EUR 187.7 billion. Will more money flow into funds again in 2023?

2022 was a challenging year for the fund industry, due to the war in Ukraine, sharp rises in energy prices, the related inflation, and interest rate hikes by the major central banks. In the meantime, however, the situation has changed. Most of the Western equity markets have posted double-digit gains since the start of the year. Japan’s Nikkei is approaching the 25 per cent mark, and the S&P 500 recently hit new highs for the year, thus reaffirming the upward trend. There are some good arguments suggesting that this positive trend will continue. Corporate earnings remain stable, even though the growth dynamics are lacking a bit at present. And the economy is also holding up well, despite headwinds from higher interest rates, although some sectors are seeing declines. Even though last year was a tough one for investors, viewed from a historical perspective, it is clear that long-term investments on the capital markets generate attractive returns in most cases.

Where do you still see some opportunities for investors in the months ahead?

Not only will interest rate hikes soon come to an end, they also result in good yield opportunities for bonds. Looking at equities, we still see attractive valuations on most of the global equity markets, outside of the USA. While there are some price exaggerations for individual companies or sub-sectors, we can sort these securities out with active management. We see the current prices as a good level for entering the market or making purchases. People who want to start a fund savings plan or already have one can purchase fund units at favourable prices right now.

Wouldn’t it also make sense to link the capital gains tax to a holding period, or for example to exempt ESG investments from the capital gains tax?

We welcome any measures that support the accumulation of private capital for pension purposes and help guide capital flows towards sustainability.

What’s amazing is that the field of ESG funds in particular has grown enormously in recent years, despite the crisis. Is Raiffeisen KAG also focusing on this trend?

Around ten years ago, Raiffeisen KAG adopted a clear-cut position on the topic of sustainability. We already manage more than one half of the roughly EUR 40 billion in assets under management in accordance with strict ESG criteria. As recently confirmed by the corporate consulting firm rfu, we are the clear market leader when it comes to sustainable investments. We believe that this market will become more and more dynamic, as there is strong demand for sustainably managed products from both institutional and retail investors. At the same time, the EU is pursuing the “Green Deal” and the financial industry is deeply involved in this as well. Both of these aspects reinforce the trend towards sustainable investing that I talked about above. In terms of our investment products, we are strongly committed to this topic.

Source: Kurier, June 25, 2023