Kalpen Parekh, MD and CEO, DSP, does not buy any asset class directly. “I only invest in mutual funds (MFs) for reasons of principle, convenience and tax efficiency. Additionally, we have a rule at DSP for all employees that additional savings should only be invested in MF DSPs and not directly, unless a particular product category is not available with us,” said Parekh during an interaction with Mint as part of our annual Financial Industry Leaders Personal Investments Series.
Speaking of the breakdown in his asset allocation, 65-70% of Parekh’s portfolio is invested in stocks and the rest in bonds. After the market lows caused by covid-19 in 2020, the equity portion of his portfolio has done reasonably well, he said.
“The three largest weightings in my equity portfolio are DSP’s small cap funds, the natural resources fund, which is benefiting from rising commodity prices, and the value fund, which have all performed very well. these last years. The fixed income portfolio, on the other hand, generated 4.5-5% due to fixed interest rates.”
When asked if he had moved his stock and debt portfolio between market segments over the past two years, he said equity remained intact.
“My approach to investing is usually to invest in something that is inherently good, but is going through a temporary bad phase because when it comes to investing, markets are cyclical. So I like to invest when a certain segment or a certain class of fund is in a down cycle.In recent years, commodity funds – gold, oil, metals, etc. – were in a down cycle.During covid, there was a day when the oil prices were negative and metal prices also crashed due to the massive lockdown shock and that’s when I built exposure in two of our commodity focused funds. Nifty is down 8-10% in the past three months, these commodity focused funds are up 10-12% because steel prices and earnings are at record highs and oil prices oil rose. Last, I moved half the exposure from the natural resources fund to our value fund (DSP), reducing my aggressive commodity-focused exposure from 10% to 4%,” he said. , adding with a disclaimer that this is his preferred asset allocation strategy. and that doesn’t necessarily mean it’s the best.
Hits and misses
While the commodities and value funds in his portfolio have excelled over the past year, gold has taken a hit. “Much of my gold exposure comes from our global gold mining fund, which is inherently very volatile. For each ₹1 change in the price of gold, the net asset value of the fund moves 1.5 times. With the exception of the last 2-3 months when gold prices have rallied, this fund has produced negative results for the whole of last year.”
“There hasn’t been a single month in 23 years of my life when I’ve worked that I haven’t spared,” Parekh said. acts as a shock absorber. The idea is not to keep cash but to be able to sleep peacefully knowing that every 3-4 years when the markets will fluctuate, the debt component gives you a sharp shock absorber”, he added.
Parekh’s debt allocation until June last year was around 40% due to a pending house purchase.
Its fixed income portfolio also serves as an emergency fund.
“At no time do I keep more ₹50,000 in my bank savings account. Cash funds are a better version of a savings account, and money from short-term debt funds becomes tax-efficient after three years. Yes, I cannot withdraw this money on the go, but it is available to me within 24 hours.”
“My spouse is a big reason for my career progression and the reasonable investment portfolio we’ve built. She’s a lawyer, but when it comes to money, she insists I make all the decisions” , Parekh said.
However, he added that he made it a point to present all of their investments to her every three months. “The idea is to keep her updated so they (his wife and son) don’t have a hard time if I’m not there.”