Why DSP MF’s Kalpen Parekh is bullish on long duration debt

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Kalpen Parekh, 51, believes in conservative investing. However, the managing director and chief executive officer of DSP Mutual Fund, has now tweaked his strategy on debt investments. “Our view is that interest rates are now reasonably priced and long-duration looks attractive right now," Parekh says.

After four-five years of staying away from it, Parekh has invested in DSP Strategic Bond Fund, an actively-managed duration fund. The fund is currently invested in debt papers that are of eight-nine years duration, says Parekh in an interaction with Mint for the Guru Portfolio series. In this series, leaders in the financial services industry share how they manage their own money.

Parekh’s portfolio has over the past 12 months delivered 29% returns. “A lot of my incremental investments have been channelled into hybrid funds as markets are expensive right now," Parekh says. He likes hybrid funds, especially during expensive markets, as they come with a built-in feature to re-balance asset allocations as per market valuations -- cheap market valuations: higher equity and lower debt; expensive markets: lower equity and higher debt.

Some hybrid funds such as multi asset allocation funds and equity savings funds also increase exposure to other defensive assets such as gold and put options when markets appear expensive. Put option prices rise during market corrections. He says he follows one principle: invest for good and don’t exit unless you need money.

Hybrid funds such as DSP Multi Asset Allocation Fund, DSP Dynamic Asset Allocation and DSP Equity Savings Fund account for 26% of Parekh’s overall portfolio. Equity funds make up for 35% of exposure, global equity funds 14%, debt funds 15%. Gold exposure through DSP World Gold