Listen to this article
Have you ever wondered what is the investment philosophy of your ideals, that made them achieve what is just a dream for the majority of individuals on earth?
What should a high net-worth individual like you should look for? To achieve the zenith of investing? Like your ideal Warren Buffet!
Diversified portfolios comprised of different asset classes and also diversification within the same asset class is the need of the hour.
Professional wealth management companies fill this gap with a wide range of products/services exclusive to HNIs.
In this article let us review one such product offered by Marcellus called “CONSISTENT COMPOUNDERS PORTFOLIO”.
Let’s see whether their motto “make wealth creation simple and accessible” stand up to their performance or is just a farce for attracting customers.
We are also going to compare it with Mutual Funds and see which is a better option, let us get started!
Table of Contents:
1.)About Marcellus
2.)Portfolio
3.)Fund details – Marcellus Consistent Compounders portfolio
4.)Fees Structure – Marcellus Consistent Compounders portfolio
5.)Performance Record – Marcellus Consistent Compounders portfolio
6.)Marcellus Consistent Compounders Portfolio Returns Vs Benchmark Returns
7.)Comparison with Mutual fund & Marcellus Consistent Compounders portfolio
8.)Taxation
- Taxation for Mutual funds
- Taxation for Portfolio Management Service
9.)Suitability
10.)Final verdict
About Marcellus
Marcellus offers services like Portfolio Management Service, Small Case & Wealth Basket.
They aim to create wealth in the long run. They do this by holding companies for a longer period with little or no churn.
“Compound interest is the eighth wonder of the world. He who understands it earns it … he who doesn’t … pays it.”
― Albert Einstein
This allows them to “Capture the magic of long-term compounding and deliver superior returns”.
Their investment strategy involves three key points
- Clean Accounts
- Capital Allocation
- Competitive advantage.
The Asset under Management is ₹ 10,108 crores & the average AUM is ₹ 1.03 crores.
Click the below link to know everything about the “Portfolio Management Scheme”.
Portfolio Management Scheme (PMS): A unique investment opportunity
An Overview of Marcellus Consistent Compounders Portfolio
Marcellus’ Consistent Compounders PMS invests in a concentrated portfolio of heavily moated companies.
- Two-Stage Filter Approach
In the first stage, they use a filter-based approach to create an investible universe of 25-30 stocks.
Further, it is screened & filtered using bottom-up research, thereby creating an assessable & sustainable portfolio of 10-15 stocks.
This two-stage filtration can drive healthy earnings growth over long periods.
Fund Details – Marcellus Consistent Compounders Portfolio
| Fund details | |
|---|---|
| Strategy Name | Consistent Compounders |
| Fund Manager | Rakshit Ranjan, CFA |
| AUM In INR Crores | 6,564 |
| Category | Large Cap |
| Benchmark | Nifty50 Total Return Index |
| Minimum Investment | ₹ 50 lakhs |
| Portfolio Metrics | |
| Wtd. Avg. Market Cap (INR Cr.) | 3,01,230 |
| Portfolio P/E (TTM) | 58x |
| Dividend Yield | 0.70% |
| Churn Ratio (TTM) | 20.30% |
| Std Deviation (12-month rollings) | 21.20% |
| Sharpe Ratio (12-month rollings) | 0.58 |
| Top 5 Holdings (accounts for ~50% of allocation) | |
| Page Industries | Consumer Discretionary |
| Bajaj Finance | Financials |
| Dr. Lal Pathlabs | Healthcare |
| Asian Paints Home | Building Materials |
| Titan | Consumer Discretionary |
| Market-Cap Wise Allocation | |
|---|---|
| Large-Cap | 88.80% |
| Mid-Cap | 10.70% |
| Cash | 0.50% |
| TOTAL | 100.00% |
| Sector Wise Allocation | |
|---|---|
| Financial Services | 35.60% |
| Consumer Discretionary | 18.90% |
| Pharma & Health-Care | 18.80% |
| Home-Building Materials | 15.80% |
| Information Technology | 7.00% |
| Consumer Staples | 3.40% |
| Cash | 0.50% |
| TOTAL | 100.00% |
Fees Structure – Marcellus Consistent Compounder’s portfolio
The Consistent Compounders PMS comes with zero entry load/exit load and with no lock-in.
It offers three fee structures.
| Regular Plan | ||||||
|---|---|---|---|---|---|---|
| Fixed | Variable | Hurdle | ||||
| Fixed Only | 2% | 0% | NA | |||
| Variable Only | 0% | 20% | 8% | |||
| Hybrid | 1% | 15% | 12% | |||
- Fixed Fee – Fixed fee of 2% or 1.5% p.a. irrespective of reaching the hurdle rate.
- Variable fee – Charges 20% fee only if it reaches the hurdle rate of 8%.
- Hybrid fee – Charges a standard rate of 1% or 0.75% p.a. & thereafter 15% fee when reaching the hurdle rate of 12%.
The investors can choose any one among these three fees structure.
Click the below link to know more about the fee structure of Marcellus Marcellus Consistent Compounders
Performance Track-Record: Marcellus Consistent Compounders portfolio
Marcellus Consistent Compounder PMS performance as on 30 Apr, 2023.
The performance data shown here is net of fixed fees & expenses charged till 31st Mar 2023.
Since inception & 3-year return are annualized & other period returns are absolute.
| Time period | Return | |
|---|---|---|
| Marcellus Consistent Compounder | Nifty 50 Total Returns Index | |
| 1 month | 6.67% | 4.10% |
| 6 months | -6.63% | 0.46% |
| 1 year | -5.05% | 6.89% |
| 3 years | 14.60% | 23.74% |
| Since Inception (Dec 2018) | 14.90% | 13.46% |
Marcellus Consistent Compounders Portfolio Returns Vs Benchmark Returns
The above metrics give us an insight into the company & the product. Let us discuss those insights one by one.
- The minimum investment amount is ₹ 50 lakhs.
- The portfolio is well diversified & spread across large & mid-cap.
- They follow twin filter criteria while picking stocks.
- There is huge volatility in the fund in the short-term period. Also, it couldn’t beat the index in the short term and medium term.
- The long-term return (since inception) is a little convincing.
- Marcellus Consistent Compounders PMS has delivered negative returns whereas the benchmark index has delivered, in 6 month and 1 year period.
- Underperforming the index and delivering negative returns when the index has delivered positive returns are huge red flags.
Comparison With Mutual Fund
Investors who are new to the Stock market will avoid direct equity. They invest via Mutual funds.
There is a cushion for higher volatility as the fund manager invests in a diversified portfolio.
So, comparatively, Mutual Funds are good than PMS or direct equity investment because they are less risky
Now let us compare the NIFTY 50 TRI (as specified in the fact sheet) with this Consistent compounders’ portfolio.
| Name | 1 month | 6 months | 1 year | 3 years | Since Inception (Dec 2018) (5-year return) |
|---|---|---|---|---|---|
| NIFTY 50 TRI | 4.35% | 0.79% | 14.64% | 28.12% | 13.36% |
| Marcellus Consistent compounder | 6.67% | -6.63% | -5.05% | 14.60% | 14.90% |
The above table clearly shows that in the long run, the returns are so similar.
“The same level of returns with less risk, so what will be a wise choice is a no-brainer!”
Also, in 1 year and 3 years time-frame, Marcellus Consistent Compounder PMS has considerably and consistently underperformed the index. Paying additional fees and hiring an expert fund manager is for beating the index and not getting beaten by the index.
Now to have a deeper understanding, let us compare the return with a large cap fund with real-time figures.
For comparison, we have chosen Canara Robeco Blue-chip Equity Gr.
| Scheme Name | AMC Name | Category | Investment date | Amount Invested | Value as on 30-Apr-23 | Profit | CAGR Returns (%) |
|---|---|---|---|---|---|---|---|
| Canara Robeco Blue-chip Equity Gr | Canara MF | Equity: Large Cap | 01-12-2019 | 50,00,000 | 82,79,888 | 32,79,888 | 15.91% |
| Marcellus Consistent compounder | Marcellus Investments | Equity: Large Cap | 01-12-2019 | 50,00,000 | 80,33,123 | 30,33,123 | 14.90% |
The above table shows the fund value as on 30 Apr 2023.
So, a simple conservative large-cap fund can deliver better returns than the Marcellus Consistent Compounders PMS.
A point to be noted here is all these values are Pre-Tax Returns. When we consider capital gains tax, the total return will be less & thereby the Post-Tax Return figure changes. Again, in taxation, PMS is less tax-efficient compared to Mutual Funds.
So, a mutual fund outperforms and is also tax-efficient when compared to Marcellus Consistent Compounder PMS. Either as a prudent HNI investor, you need to stick to mutual funds or need to find a better-performing PMS with a help of a professional financial planner.
Taxation
The current regime taxes long-term capital gains at 10% with a basic exemption of INR 1,00,000 while short-term capital gains are taxed at 15%.
This is huge because,
“Taxation under a Mutual fund is deferred until when the investor exits the fund”.
But whereas under PMS, it will be taxed in the same financial year as & when there is a churn in the portfolio.
So mutual funds seem good in the taxation segment compared to PMS
Taxation For Mutual Funds
Let us understand this with an example figure. Suppose, in December 2019, Raj invested ₹50 lacs in Mutual Fund A and was allotted 5,00,000 units at ₹10 per unit.
The fund manager then invested in a diversified portfolio of 30 stocks. During the year 2019-20, the fund manager sold stock X and invested the amount in stock Y.
As on 31 March 2020, the net asset value (NAV) of the mutual fund units is ₹11 per unit.
“Under Mutual fund investment, the tax triggers only when the investor sells the units and not when the fund manager churns the portfolio or when the NAV changes”.
Since Raj hasn’t sold his investment in Mutual Fund A, there will be no tax implication for him for FY2019-20.
Taxation For Portfolio Management Service
Let’s take another example. Let’s suppose that Vinoth invested ₹50 lakhs in PMS-B in December 2019, and then the PMS manager invested in a diversified portfolio of 25 stocks.
During the year 2019-20, the PMS manager sold stock X for ₹6 lakh which was purchased for ₹5 lakh. The fund manager invested the same amount of ₹6 lacs in stock Y.
Under PMS, the stocks are purchased and sold from the DEMAT account of the investor. Hence, this will be taxed as capital gains for FY2019-20.
Since the investment was held for less than 12 months, Vinoth will pay a tax of ₹15,000 on the short-term capital gain of ₹1 lakh (sale value of ₹6 lakhs minus its purchase cost of ₹5 lacs).
Let’s assume that the PMS fund manager sold the investment in stock Y for ₹8 lakhs in Oct 2021 and invested the same amount in stock P.
Again, in this case, Vinoth will have to pay a long-term capital gain tax of ₹10,000 on the capital gain of ₹1 lakh (sale value of ₹8 lacs minus its purchase cost of ₹6 lacs & exemption 1Lakh).
“This clearly shows that, from a tax perspective, Mutual fund investments are better than PMS”.
In the returns table, we saw that the pre-tax return under both investments is similar. But when we consider a post-tax return, there is no value addition for the risk taken under a Consistent compounder’s Portfolio.
What is the point of all the risks if the proportion of value earned to risk is not equal? Mutual funds will give you good returns with less risk.
If you want to really diversify over and above mutual funds and look for aggressive returns, then please avoid Marcellus Consistent Compounders Portfolio and look out for a better and consistent performing PMS or AIF.
Suitability
If you think you are suitable to invest in Marcellus Consistent Compounders PMS because you fulfill the below criteria
- You have already invested in an equity investment & looking for diversification within the same asset class.
- You have a high-risk appetite.
- You are ready to invest a minimum of ₹ 50 lakhs.
- You have a longer time horizon for investment.
- You aim for wealth creation in the long run without looking for any in-between payouts.
Then you are miserably in the wrong place! Marcellus Consistent Compounders PMS will not be a suitable option for you.
Can Sachin Tendulkar score a century with a broken bat? Does that make Sachin Tendulkar a bad batsman? No.
In the same way, although you fulfill all these criteria, you can’t bet on a losing horse!
Having said that, there are still far better options in the market than Marcellus Consistent compounders in the same PMS category.
If you don’t fit under any of these bullet points, then you can stay away from PMS altogether and opt for Mutual Fund which is a good option.
If you are looking for a better PMS than Marcellus Consistent Compounders PMS, please check with a professional financial planner for the comparison and outlook of competitive PMS Schemes.
Final Verdict on Marcellus Consistent Compounders:
Investors who thrive on conservative earnings & growth over a longer period can go for mutual funds.
If you have invested enough with mutual funds, looking for the next level of risk and Return, then you can consider PMS. But definitely, Marcellus Consistent Compounders PMS is not the one for you.
Mutual Funds outperform Marcellus Consistent Compounders PMS in tax efficiency and returns. Also, NIFTY 50 TRI gives better returns compared with Marcellus Consistent Compounders PMS.
On the whole, if you have already invested in a wide range of assets and you are looking for diversification, then you can consider a better PMS than Marcellus Consistent Compounders PMS for your satellite portfolio.
Marcellus Consistent Compounders PMS is a Consistently underperforming for the last 3 years.
Please don’t fall prey to amateur pieces of advice on social media sites like Quora, Facebook, Twitter, etc. They push you into taking high risks without much value.
It is wise to always take the help of a professional financial planner.
Leave a Reply