Master class: Why DSP's Kalpen Parekh is betting on hybrid funds

The DSP MF CEO reveals how hybrid funds, bonds and gold anchor his portfolio amid stock market volatility

- Jash Kriplani

Kalpen Parekh, managing director and chief executive officer of DSP Mutual Fund, says he has been investing in mutual funds since 1999, when he began his career. "I have seen the most-favoured sector at that time — information technology (IT) — crashing along with the markets after the Dotcom bubble burst," he says. "It has somewhere made me an investor who focuses more on reducing risks, rather than chase returns," Parekh adds.

Over the past 12 months, Parekh has been allocating to hybrid funds (which invest in a combination of low-correlated assets) such as equity savings funds and multi-asset funds, as market valuations have been expensive. His portfolio's allocation to hybrid funds has risen from 26% last year to 34%, Parekh shared in an interaction with Mint for the Guru Portfolio series. In this series, leaders in the financial services sector share how they manage their own money.

Current asset allocation As mentioned earlier, his exposure to hybrid funds stands at 34%. His exposure to Indian equities stands at 34%; exposure to international equities is at 13%; 12% is in debt funds and 7% is in gold. Gold allocation is split 45% in sovereign gold bonds and 55% in gold mining funds. The latter invest in equity shares of gold mining companies. Gold mining stocks typically rise 1.3 to 1.5 times the gold prices. However, Parekh warns that gold mining funds are not for everyone "as it also tends to be more volatile when gold prices fall".

Parekh has remained cautious on equity markets, but has slowly added to equities amid the recent market correction. He has been allocating money to equity funds, which have a mixed exposure to India and international stock markets.

"Have shifted some money from arbitrage fund to our value fund and aggressive hybrid fund (just around 2%). But my dynamic asset allocation fund exposure will automatically increase equity exposure when valuations correct," he says.