 
Prashant
Jain ANOOP
BHASKER RITESH
JAIN |
Bonds matter A
strong belief that tomorrow never comes easy makes Prashant Pimple
strive to achieve the best everyday Prashant Pimple has just about perfected the art of playing the spreads in a spasmodic debt market. A graduate from Sydenham College, Mumbai, a Masters in Finance from Jamnalal Bajaj University and a Chartered Treasury Analyst from ICFAI, Pimple, now 29, says his academic learnings are still fresh in his memory and that helps. The youngest among BS best fund managers, Pimple hardly showed his excitement when he was told about his ranking. Just short of being apologetic, he attributed much of his performance to the processes and the consultative approach that his firm put in place to ensure credible and consistent performance. Pimple and the debt team at Reliance rely heavily on analysis and use various bond models to devise portfolio strategies in a market which favours the smart. While managing duration, liquidity and credit risk remain the three essentials for debt management, for Pimple the key is to get the portfolio mix right and at the right time. “Debt management is all about asset allocation – it is like oxygen for a debt manager. It is not just about taking the right duration calls. What really makes the difference is the timing,” he says. Normally, Pimple follows a two-pronged approach. He reserves about half to three-forth of the portfolio to reflect his medium-term outlook through credit calls while actively manages duration by indulging in gilt and cash to play short-term movements. Pimple would easily qualify as one of the most active fund managers, altering the duration of his portfolio almost daily. Here is an example. As a couple of months ago when the 10-year yield surged to 8.25 per cent, he started increasing his duration and took it all the way up to 10 years till the yields peaked at 8.45 per cent. The call turned out right as the yield crashed to 7.54 per cent thereafter. Pimple has promptly reduced his portfolio duration to 2.53 years in his income fund at present. It is a deep-rooted sense of realisation that time waits for no one and there is no tomorrow as far as markets are concerned that makes Pimple hyperactive. He may look perfectly relaxed, but he is a man in a hurry – do it now or never. Predictably, he wants to retire as early as possible. “I have no plans for future,” says Pimple whose only other love, besides markets, is his wife and daughter. He derives immense pleasure out of teaching too. A hardcore numbers person, Pimple is quick to exploit market aberrations to devise synthetic positions. One strategy he uses often is the Barbell strategy. For instance, take a situation where the spread between the 10-year and 30-year paper has increased sharply and so has the spread between 5 and 10-year paper making the 10-year costly to buy directly. Pimple would create a low cost 10-year position by going short on 10-year paper and long on the 5- and 30-year paper. If the risk-return equation looks favourable, Pimple switches from papers in demand to out-of-favour ones to pocket that extra penny. Another common strategy that has worked well for him is the forward rate strategy, which involves projecting say what the 1-year yield would be 1 year hence. Based
on this analysis one could take a call on whether to buy a 1-year
paper and wait to roll over later or buy a 2-year paper instead.
Pimple is passionate about markets and there isn’t a single
day when he feels bored of what he is doing. “I am here by
choice and will go by choice,” says Pimple with certain degree
of assertiveness.
• HOME Business Standard • FUND MANAGER • October 2006 |
