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Marcellus Kings of Capital

Scheme Rating

IME Scheme Rating

3 of 5 stars

A call on the specific theme: We typically do not recommend Thematic funds to investors, since it requires getting in and out of the theme at the right time. Typically a strong contra approach (investing in themes when they are out of favour, and getting out when they are popular) leads to better performance, but this is very hard to actually implement in practice given strong behavioural instincts against such an approach (investors often end up entering themes post a run-up, which can often be the worst time to invest). In our view, thematic funds are primarily suitable for more astute investors who have a deep underlying understanding of the investment merits of the theme.

IME Strategy Rating

3 of 5 stars

Highly Focussed Financial Sector Strategy: It is a concentrated approach (10-15 companies) with Laser-focused on the Financial Sector on the back of a very strong rationale for the same. Marcellus’s strong focus on clean accounting, corporate governance, capital allocation, and barriers to entry help mitigate many of the normal risks while investing in the finance sector, which makes this an interesting investment option for investors willing to take on a higher level of risk.

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 Kings of Capital

Type: BFSI | Sectoral | AUM (299.9 cr) | Inc Date (28 Jul 2020)

Investment Strategy

Key objective of “Kings of Capital” strategy is to own a portfolio of 10-14 high-quality Financial companies that have good corporate governance, prudent capital allocation and high barriers to entry.

Portfolio Construction

King of Capital Portfolio will span the entire financial services sector:

  • Lenders: long track record of prudent credit underwriting, smart capital allocation and good corporate governance
  • Life Insurers: large distribution footprint, customer-centric product innovation and an effective actuarial risk management framework
  • General Insurers: focus on long term profitability and return on equity and a track record of conservative underwriting across cycles
  • Asset Managers/brokers: moated business models and strong pricing power

Investment Philosophy

The three tenets of Kings of Capital remain the same:

  1. Clean accounting and good corporate governance;
  2. Historical evidence of prudent capital allocation; and
  3. High barriers to entry so that companies are able to sustainably generate return on capital higher than cost of capital.

INVESTMENT PROCESS

  • Universe: 95  financial companies in the universe
  • Forensic Accounting Screen: eliminating companies with sub-par accounting to get to 65 companies
  • Use Proprietary Capital Allocation Models: detailed analysis of annual reports and published financials to get to 23 companies
  • Channel checks and Management Meetings: with the remaining 23 companies

Trailing Performance

1yr 3yr 5yr Since Inception
Marcellus Kings of Capital 22.8 4.9 12.9
S&P BSE 500 TRI 41.1 18.9 23.6
Alpha over Broad Mkt BM -18.3 -14 -10.7

Performance as of: 31-Aug-24 | Inception Date: 28-Jul-20

Fund Managers

Saurabh Mukherjea | 5-star rated FM

Founder & CIO | 27 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.

Tej Shah | 3-star rated FM

Fund Manager | 9 yrs Experience | 6 yrs at current firm

Past Experience: Investment Analyst (MF Advisors LLP), Investment Banking Analyst (Ambit Holding)

Tej Shah is a Portfolio Manager at Marcellus. Prior to joining Marcellus, Tej worked at Mayfield, a Silicon Valley headquartered venture capital fund that manages $3Bn globally and $220Mn in India. Tej spent 2 years as a part of Mayfield India’s investment team covering multiple sectors and being at the centre of India’s evolving venture ecosystem. Prior to Mayfield, he was a part of the equity and capital markets team of Ambit Capital where he was involved in the end to end execution of IPOs, QIPs and buybacks. Tej is a Chartered Accountant and has cleared all levels of the CFA exam. He holds a B. Com degree from Ahmedabad University.

Fee Structure

Fee StructureFee
Fixed Fee Structure2.5
Variable Fee Structures1.5% fixed + 15% above 10% 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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