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Marcellus Consistent Compounders

Scheme Rating

IME Scheme Rating

3 of 5 stars

We do not currently recommend Marcellus Consistent Compounders: While Marcellus has very strong pedigree, with a strong team and a very well defined investment philosphy, we do not believe that the current market environment is suitable for Marcellus’s very strong quality focus. After almost a decade of re-rating & consistent outperformance of high-quality franchises, their valuations have turned very expensive, leading to a high valuation base for continued outperformance. In addition, with the economy starting to turn around, a lot of previously laggard economically sensitive sectors are starting to perform (with many of these companies not meeting Marcellus’s investment criteria). This can potentially lead to the current strong underperformance continuing, until either Marcellus does not increase flexibility in their approach or the market environment changes.

IME Strategy Rating

5 of 5 stars

High quality franchise oriented strategy: The Strategy focuses on identifying companies with a track record of consistent growth and compounding returns. The portfolio typically comprises businesses with sustainable competitive advantages, strong management, and a history of delivering consistent financial performance. It is a 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.

PMS Scheme Ratings are driven by IME’s Proprietary Scheme Rating Methodology, which takes into account our ratings of the Scheme’s investment strategy, its maturity, the investment team, and our separate rating on the AMC that runs this particular scheme. Our views on each of these individual criteria are available via the IME RMS – which you can view by reaching out to one of our relationship managers (using either the live chat or book appointment feature on this site).

IME View on Marcellus Consistent Compounders

Type: Large Cap | High-quality | AUM (5245.7 cr) | Inc Date (1 Dec 2018)

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 Score and Succession Planning

Trailing Performance

1yr 3yr 5yr Since Inception
Marcellus Consistent Compounders 19.6 8.2 16.2 15.2
S&P BSE 500 TRI 39.5 19.5 19 15.7
Alpha over Broad Mkt BM -19.9 -11.3 -2.8 -0.5
Nifty 50 TRI 28.5 16.2 16.7
Alpha over Category BM -8.9 -8 -0.5

Performance as of: 28-Feb-23 | Inception Date: 01-Dec-18

Fund Managers

Saurabh Mukherjea | 5-star rated FM

Founder & CIO | 26 yrs Experience | 6 yrs at current firm

Past Experience: Ambit Capital (CEO), Noble (Head of India Equities), Accenture (Consultant), London Economics (Consultant)

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.

Rakshit Ranjan | 5-star rated FM

Fund Manager | 20 yrs Experience | 5 yrs at current firm

Past Experience: Ambit Capital (FM), Lloyds Banking (Director Research), Noble & Co (Analyst)

Rakshit 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, Rakshit was the lead consumer analyst at Ambit. His earlier experience was in UK equities at the Lloyds & Noble groups.

Fee Structure

Fee StructureFee
Fixed Fee Structure2
Variable Fee Structures20% above 8% hurdle
Exit Fees

AMC

AMC: Marcellus PMS (click link for detailed AMC review)

Not a top recommendation (at this time) due to weak recent performance: Built on the strong foundation of a strong founding team and a tightly defined and time-tested investment philosophy, Marcellus is a good option for investors seeking to invest only in the highest quality companies. However, the lack of flexibility in Marcellus's investment approach, makes it difficult for their strategies to perform across market conditions. The lower-rating for a pedigreed investment team, with a strong investment philosophy, is primarily driven by the weak recent performance & relatively lower flexibility for Marcellus to reposition portfolios in changing market environments.

AMC Rating

3 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

Performance

2 of 5 stars

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Note: PMS AMC & Scheme Reviews and Ratings are based on IME Capital’s Proprietary Review and Rating Methodology (read more here: AMC Rating & Scheme Ratings). These reflect the unbiased views of our central research team, based on our assessment of the investment value of these PMS/AIF strategies for our investors. We follow a highly stringent rating-criteria, where approximately 50% of PMS AMC’s & strategies would be rated 2-star or below (this is not meant to indicate that these funds are not investment-worthy, but that they do not currently fulfill the requirements we focus on for recommending funds to our investors — based on our internal views on the merit of the AMC/strategy relative to peers). Reviews & Ratings are primarily based on research of publicly available information (SEBI disclosures, PMS websites, PMS-aggregation platforms, webinar recording, media interviews etc.) and no explicit consent is required from AMCs for the same. While we endeavour to do further due-diligence via direct interactions with the investment teams of AMCs, this is typically restricted to AMC’s that meet our foundational fund selection criteria (reviews on lower-rated AMCs are often based solely on publicly available information). The views reflected in our Reviews & Ratings, are our independent views and may not be shared by the AMC’s and the investment teams. Please read detailed disclaimer for more.