Scheme Rating
Scheme Rating
5 of 5 stars
Strategy Rating
5 of 5 stars
Type: Large Cap | High-quality
AUM (6084.18 cr)| Inc Date(1-Dec-2018)
LT Performance
3 of 5 stars
Scheme Age
3 of 5 stars
IME View onMarcellus – Consistent Compounders
- High quality franchise oriented strategy: Highly focused and concentrated strategy. A strong and time-tested strategy to deliver long-term consistent returns, though it may underperform in a strong bull market. Marcellus Consistent Compounder is a flagship PMS that invest in companies with clean accounts, a superior capital allocation record, and high entry barriers.
- Strong Fund Manager Credentials: One of the strongest investment management teams, with both Saurabh and Raksh*t being highly seasoned investment professionals, with strong track records and fundamental research credentials
- Very high valuations of Quality Franchises: High-quality franchises have seen a very substantial re-rating in recent years, leading to a number of these trading at valuations that are arguably hard to justify (even when taking into account the quality of the company). This creates a very high valuation base for these companies to continue to perform.
- Performance: Consistent Compounders started with a period of strong performance, continuing the strong performance of the same strategy by the same team at Ambit prior to founding Marcellus. However, performance in recent years has been underwhelming (which we view as an impact of the very base valuations of the high quality franchises that Marcellus typically invests in). We continue to remain a little cautious about future performance (especially in the shorter-term), given the continued high valuations of leading franchises and signs of markets getting more optimistic on other sections of the market.
- We recommend Marcellus Consistent Compounders: However, we are concerned about the valuations of some of the portfolio companies, and we would prefer more flexible strategies until this valuation gap is corrected.
Investment Philosophy
Key Aspects of Identifying Consistent Compounders
- Clean accounting
- Companies with a track record of superior capital allocation
- Companies that pass both those filters, identify those with high barriers to entry
Investment Process
Rigorous process to filter out based on 1) forensic accounts, 2) sustainability parameters, 3) bottom-up research, channel checks, and management meetings to invest in 12-15 high-quality companies.
- Forensic Accounting: Avoid companies with poor corporate governance. About 40% of the starting 500 company universe get eliminated here.
- Sustainability Parameters: Using defined threshold on revenue growth, and ROCE. Identify cash-generating growing franchises. Around 50% get further eliminated at this step.
- Bottom-up research: research on only 10% of the universe. Detailed analysis of secondary resources along with channel checks, independent views and management meetings.
Sell Framework
Sell decisions are based on 2 factors i.e lower than expected free cash flow growth and uncertainty around ‘longevity score’ due to a slowdown in growth, weakness in moat and legacy.
- Free Cash Flow Growth: Weakening competitive positioning impacting slower growth
- Moat Score: Weakening franchise’s strength visible in pricing power
- Weakening Lethargy ScoreandSuccession Planning
Unequivocal Focus on the Quality of the BusinessIn-depth bottom-up research to identify companies with sustainable competitive moats and build a portfolio of 10-15 stocks that deliver healthy compounded earnings growth over long periods of time.
Portfolio Details
Trailing Performance
| 1yr | 3yr | 5yr | Since Inception | Inception Date | No. of yrs |
|---|---|---|---|---|---|
| 1.5 | 12.3 | 0.2 | 1-Dec-2018 | 5 |
Portfolio Allocation
| No of Stocks | Large-Cap | Mid-cap | Small-cap | Cash |
|---|---|---|---|---|
| 16 | 79.5 | 11.6 | 8.5 | 0.5 |
Data as of 31-Oct-2023
Fund Managers
Saurabh Mukherjea | 5-star rated FM | Founder & CIO | LinkedIn Profile
26 Years of Experience | 5 Years at Current firm
Prior Work Experience: Ambit Capital (CEO), Noble (Head of India Equities), Accenture (Consultant), London Economics (Consultant)
Qualifications: MSc - Economics (LSE),
Saurabh comes with a very strong investments background, having helped build Ambit's broking, wealth & investment management businesses as CEO. He was also responsible for building Execution Nobles India broking business (which was sold to Ambit) and having set up and sold Clear Capital (a UK based small cap research fund). Saurabh is a strong believer in investing in the long-term in very high quality clean businesses and has written a number of books including Gurus of Chaos, The Unusual Billionaires and Coffee Can Investing.
Raksh*t Ranjan | 5-star rated FM | Fund Manager | LinkedIn Profile
19 Years of Experience | 5 Years at Current firm
Prior Work Experience: Ambit Capital (FM), Lloyds Banking (Director Research), Noble & Co (Analyst)
Qualifications: CFA, BTech (IIT-Delhi)
Raksh*t has a strong investment management track record, having launched Ambit's Coffee-Can PMS in Mar-17, which he ran till Dec-18. The Coffee-Can PMS was one of the best-performing PMS schemes in 2018. Prior to setting up the Coffee-Can PMS, Raksh*t was the lead consumer analyst at Ambit. His earlier experience was in UK equities at the Lloyds & Noble groups.
Fee Structure
| Fee Structure | Fee |
|---|---|
| Fixed Fee | 2 |
| Variable Option 1 | 20% above 8% hurdle |
| Variable Option 2 | 1% fixed + 15% above 12% hurdle |
AMC
AMC: Marcellus PMS (click link for detailed AMC review)
Built on the strong foundation of a strong founding team and a tightly defined and time-tested investment philosophy, Marcellus clearly stands out as one of the top PMS services in India for long-term capital deployment.
AMC Rating
5 of 5 stars
AMC Pedigree
5 of 5 stars
AMC Size
5 of 5 stars
Team Pedigree
5 of 5 stars
Inv Philosophy
5 of 5 stars
Differentiation
4 of 5 stars
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