Interview

Nicole: Hey Tomas. Thank you for your time. Could you first introduce yourself briefly?

Tomas: Hello and thank you for having me. I work for an international company, NN, as a portfolio manager. I have been managing nearly 1.2 billion EUR for our clients for over 8 years now. My clients are future pensioners, which makes me even more responsible and highly focused on selecting the best investments. The pension funds I manage range from very conservative ones, with bonds as the primary assets, to relatively aggressive funds with nearly 100% invested in equities. These funds primarily invest in developed countries in Europe and the US, with a minor portion allocated to emerging markets worldwide. Prior to joining NN, I lived in Prague and worked as an investment analyst for a local broker, Patria. I studied Financial Economics at Erasmus University in Rotterdam.

Nicole: It must be a significant responsibility to manage 1.2 billion EUR. How do you handle the stress, especially considering the impact of any mistakes on so many people? Can you also share how you make investment decisions?

Tomas: Managing such a large sum is indeed a significant responsibility. That's why diversification is the cornerstone of my investment approach. I constantly emphasize diversification, not only in the funds I manage but also in my personal investments. In the funds, we invest across various asset classes, and geographical diversification is crucial. Since I manage pension funds, our time horizon is quite long, so our investment strategies are centered around long-term global trends. However, when a compelling short-term opportunity arises in the market, I seize it to enhance returns for our clients.

My investment decisions are primarily influenced by current and anticipated conditions in financial markets, as well as various macroeconomic and monetary indicators. Recently, I've been placing more emphasis on market sentiment and positioning indicators, which provide insights into market fundamentals. Markets are ultimately driven by the actions and reactions of market participants, and monitoring sentiment indicators such as fund flows, global investor surveys, or momentum factors helps in making informed decisions. Additionally, I rely on signals from our quantitative models, which can process vast amounts of market data rapidly and objectively. The key advantage of using such models is their emotional neutrality, as they lack the biases that human investors often have. One of the most common mistakes investors make is letting their emotions dictate their decisions, which quantitative models can help mitigate.

Nicole: Your approach sounds really interesting. And now I have to ask a classic question for all investors:) What should ordinary people invest in these days to overcome this economic crisis?

Tomas: Despite the significant growth we've seen since the beginning of the year, I continue to believe in US stocks. The optimism surrounding the AI revolution has primarily benefited a handful of large companies. Specifically, the five largest companies in the S&P 500 index by market capitalization (MAGMA) have achieved a 52% return, while the remaining 495 components of the index have seen a return of only 10%. The good news for investors seeking opportunities is that high prices are concentrated in a small number of companies. In my opinion, US small-cap stocks are attractive. Firstly, profitable companies in the Russell 2000 index, which includes smaller companies, trade at a notable discount compared to peers in the S&P 500. Secondly, small-cap stocks tend to outperform large-cap stocks when inflation declines from high levels, as smaller companies can more effectively negotiate with suppliers and set prices with consumers.

Nicole: Which interesting trends are you currently observing?

Tomas: I'm definitely keeping a close eye on technological trends, especially those related to AI. The ongoing AI revolution has the potential to significantly improve labor productivity, ultimately leading to robust global GDP growth in the coming years.

Nicole: Why did you decide to start investing in startups as well?

Tomas: As I mentioned earlier, diversification is a key element of my investment decision process, and I aim to diversify further. While the majority of my investment portfolio consists of liquid assets traded on global stock exchanges, I've always allocated a portion of my personal portfolio to alternative, less liquid investments with higher potential yields, such as real estate in the past. I've been contemplating investing in smaller startups for some time now, as they offer unique opportunities for growth and diversification.

Nicole: And why did you decide to invest directly in Colocals?

Tomas: Because you have a product that follows the trends that I mentioned. You're getting AI into local businesses. Which is great, because the AI market is going to be mainly divided for the next 2 years. It's going to be a bit like the dotcom hype in the 90's, when the biggest players in the online world like Facebook, Amazon, etc. were created. In a couple of years, most people will be using AI on a daily basis, but it's going to be harder to get reasonable market share for companies.

And I also believe that the next few years we will see a growing importance of local economies. We see it already now, that during the crisis, countries support mainly their own companies. But it's always about the people behind it. And I've known Patrik for a long time and I know he's been working on the domain of local small businesses for a long time and he has experience with building startups. And since they already have a validated product and the first customers, it was not such a big risk for me. At least I hope so:D

Nicole: Would you also recommend ordinary people to invest in startups?

Tomas: Certainly it's not for everyone. As I said, diversification is always the most important thing. If you have enough free money, you can take some risk. Then it is certainly interesting to invest a certain amount in startups. With startups, the big advantage is that you can multiply your investment several times over, which almost no other investment can guarantee you. The disadvantage is that this investment is not very liquid, i.e. you will see your money only in a few years. Anyway, it is very interesting. But if you decide to do so, I recommend spending more time choosing a suitable startup and ideally if you understand at least a little bit of the domain they are doing. I like to follow technology, so when I heard about Colocals' idea, I was more or less sure right away.

Nicole: Thank you for an interesting interview. And since we are currently living in wild times, I hope we will talk about more tips and news soon.

Tomas: Thank you also and I'll be happy to.