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Banks and financial institutions in India are like the backbone of our financial system. They are very important for the development of our economy.
How do banks support the Indian economy?
They help businesses by providing them with money to start new projects or expand their operations.
Banks support trade and business activities, making it easier for people to buy and sell goods and services. They also provide funds for building important infrastructure like roads, bridges, and buildings.
All these activities would get stalled if it were not for banks.
Imagine a day without banks in India!
What if a company combines the power of banks with a PMS?
The PMS is called “Marcellus Kings of Capital”
Table Of Contents
Understanding Marcellus “Kings of Capital” PMS
What is Marcellus?
Process of Marcellus
The 3-step investment philosophy of Marcellus
Overview of Marcellus Kings of Capital
Fee Structure
Allocation of Kings of Capital
Top 3 Holdings
Market Cap allocation
People Who can invest in Marcellus Kings of Capital PMS
How did Marcellus filter the companies?
Marcellus Kings of Capital Portfolio Returns Vs Benchmark Returns
Marcellus Kings of Capital Portfolio Vs Bank Nifty
Marcellus Kings of Capital vs Other Thematic Funds
How is PMS taxed?
Mutual Fund Scores High in Tax Benefits too!
Change in Approach?
Marcellus ‘Kings of Capital’ PMS vs Marcellus Consistent Compounders
Marcellus ‘Kings of Capital’ PMS vs Marcellus Little Champ
Final Verdict on Marcellus Kings of Capital PMS
Marcellus Kings of Capital PMS or Mutual Funds?
Conclusion
Understanding Marcellus “Kings of Capital” PMS
Marcellus “Kings of Capital” PMS consists of the full spectrum of financial service providers – lenders (banks, NBFCs, and housing finance companies), life insurers, general insurers, and asset managers/brokers.
But wait, just to brush up on your basics, in case you weren’t sure what is a PMS. You can click What is a Portfolio Management Scheme to know more about this
Let us now make a detailed study about this PMS and benchmark it with the indices, analyze its pros and Cons, and see which is a better option,
let us get started!
What is Marcellus?
Marcellus Investment Managers is an Indian asset management company that specializes in equity investments.
It was founded in 2018 by Saurabh Mukherjea and Rakshit Ranjan. Marcellus follows a bottom-up, long-term investment approach focused on high-quality businesses that generate sustainable and profitable growth.
Process of Marcellus
Marcellus Investment Manager’s objective is to supply superior risk-adjusted returns to its customers with the aid of investing in a focused portfolio of Indian equities.
They focus on companies with a history of consistent earnings growth, strong cash flows, and robust corporate governance practices.
The 3-step investment philosophy of Marcellus
- clean accounting practices
- capital allocation
- superior identifying companies with competitive advantages or moats.
Overview of Marcellus Kings of Capital
| Strategy | Category | Fund Manager | Date of Inception | Age Of PMS | Corpus (in Cr, approx) | Benchmark | Returns SI (CAGR) | Stocks In Portfolio |
| Marcellus Investment Managers Kings of Capital | Multi Cap | Tej Shah | 28th July 2020 | 2Y 10M | 559 | BSE 500 TRI | 9.6% | 11 |
- The minimum investment amount is ₹ 50 lakhs for Marcellus Kings of Capital PMS.
- No lock-in period or exit load in Marcellus Kings of Capital PMS.
- It is a multi-cap portfolio of financial stocks that includes not only lenders but also general insurers, life insurance, fund managers, and brokers. Marcellus King of Capital concentrates on including niche financial businesses in its portfolio.
- Marcellus’ investment philosophy is based on the ideas of Kirby and Thiel, refined into three pillars: clean accounts, capital allocation, and competitive advantage.
- Marcellus uses forensic accounting and capital assessment to select companies. Marcellus seeks firms with strong capital allocation and competitive moats.
- The key objective of this Marcellus Kings of Capital PMS is to own a portfolio of ten to fourteen high-quality notable Financial companies (banks, NBFCs, life insurers, general insurers, asset managers, brokers) which have good corporate governance, prudent capital allocation, and high barriers to entry.
Fee Structure:
| Options | Rate |
| Fixed fee | 2.5% p.a. fixed fees and zero performance fees |
| Hybrid model | 1.5% p.a. fixed fees and performance fees of 15% profit share over a hurdle of 10% |
Allocation of Kings of Capital:
Top 3 Holdings:
Market Cap allocation:
People Who can invest in Marcellus Kings of Capital PMS
- An ideal investor who can invest in Kings of Capital PMS should have the below criteria.
- Having a high-risk appetite, given that banks and financial institutions have higher chances of default.
- A highly patient investor who can withstand Market cyclicity
- You are ready to invest a minimum of ₹ 50 lakhs Marcellus Kings of Capital PMS.
- You have an extended time horizon for investment.
- Ready to trust the PMS and the fund manager until you arrive at your corpus.
But still, even if you have all the qualities, is it worth investing in Marcellus Kings of Capital PMS? Read to find more.
How did Marcellus filter the companies?
Let’s now delve into the most important part of how Marcellus filters their stocks from the whole universe.
Stage 1: 95 financial stock companies are first filtered out. These include all the banking, NBFC’s insurers, and asset managers.
Stage 2: Screening for fraudulent companies.
Marcellus study the companies filtered in stage 1 with further credential checks by taking into account 11 ratios covering income statement (revenue/ earnings manipulation), balance sheet (correct representation of assets/liabilities), NPA recognition, and audit quality check.
The selection of these ratios has been inspired by Howard M. Schilit’s legendary forensic accounting book “Financial Shenanigans”.
Stage 3: Marcellus Selecting top stocks
The companies selected in filter 2 are filtered again. After that, only the cream of the crop is included based on the detailed analysis of annual reports and published financials
Stage 4:
In the final stage, they look for 3rd party checks in addition to the company-provided information.
Instead of depending totally on company-furnished records, Marcellus conducts unbiased studies and seeks out records on their own.
They seek industry experts, suppliers, customers, competitors, and other sources to gain a more comprehensive understanding of the company’s operations, market position, and management quality.
Finally, 14-20 stocks are selected from a whole universe of more than 95+ companies resulting in a median mkt. cap of Rs. 55,111 Cr.
Marcellus Kings of Capital Portfolio Returns Vs Benchmark Returns
The Kings of the Capital portfolio has given us subdued returns over several months and the overall returns since inception is dismal as well with a meager 9.6% return.
| Trailing Returns (%) | 1M | 3M | 6M | 1y | 2y | Since inception |
| Kings of Capital PMS | 5.90% | 8.90% | 1.30% | 6% | -0.40% | 9.60% |
Now let’s compare and see how Kings of Capital’s portfolio has performed with its benchmark index.
Below is the comparison of the PMS’s Returns as of May 31, 2023.
Looking at the overall performance of the PMS, it has constantly underperformed even the benchmark of BSE 500 TRI. The returns since the inception are also abysmal when compared with the benchmark index.
For any PMS the returns need to be up and over the benchmarks indices. But we don’t see that here.
Marcellus Kings of Capital Portfolio Vs Bank Nifty
Ok, the Kings of the Capital portfolio didn’t beat its benchmark index. But how did it fare against its sectoral counterpart index, the Bank Nifty?
Now let’s go a step further and do a comparison with the Bank Nifty over the same period and see if we were able to beat it.
As we see above, the Kings of Capital have failed to even beat the Bank Nifty in all time periods.
They haven’t been able to even come closer to the bank nifty’s performance all through these years.
On further analysis, we see that the non-lenders in Kings of Capital have delivered lower returns leading to a lower blended return and relative underperformance vs. the Bank Nifty.
Marcellus Kings of Capital vs Other Thematic Funds.
Let alone this, on comparing with the actively managed Sectoral-Banking Mutual funds there is a wider gap between the Kings of Capital PMS returns and the funds over 3 years.
How is PMS taxed?
It is worth noting that the previously mentioned returns are before-tax returns. When considering the impact of capital gains tax, the actual return would be reduced, leading to a different post-tax return value.
Furthermore, “ in terms of taxation, Portfolio Management Services (PMS) generally tend to be less tax-efficient compared to mutual funds”.
This means that the tax burden on PMS investments could be relatively higher due to factors like higher turnover, and taxable events triggered by individual stock transactions.
Mutual Fund Scores High in Tax Benefits too!
There are some tax benefits available for mutual fund investors like ELSS funds, which aren’t available in PMS.
Therefore, investors should carefully consider the potential tax implications and account for the same when considering the returns from this PMS.
Change in Approach?
Marcellus has acknowledged their underperformance concerning the Bank Nifty was because they had missed some of the turnarounds in the Financial Services sector.
Yet, Marcellus has decided to maintain discipline and focus on investing exclusively in companies that have a proven track record of consistent earnings growth and the potential to sustain profitable growth over the long term.
You can read Kings of Capital’s underperformance to understand further on this.
Marcellus ‘Kings of Capital’ PMS vs Marcellus Consistent Compounders
Marcellus Consistent Compounders creates an assessable & sustainable portfolio of 10-15 stocks by screening and filtering using bottom-up research while,
Marcellus “Kings of Capital” PMS consists of the full spectrum of financial service providers – lenders (banks, NBFCs, and housing finance companies), life insurers, general insurers, and asset managers/brokers.
Click below to read the complete review of Marcellus Consistent Compounders.
Marcellus Consistent Compounders Portfolio: PMS Review- Should you Invest?
Marcellus ‘Kings of Capital’ PMS vs Marcellus Little Champ
The Fixed fee of Marcellus Little Champ is 1% (quarterly), while the fixed fee of Marcellus ‘Kings of Capital’ PMS is 2.5% p.a.(zero performance fees).
Click below to read the complete review of ‘Marcellus Little Champ PMS’
Marcellus Little Champs PMS: Should You Consider Investing? An In-Depth Review
Final Verdict on Marcellus Kings of Capital PMS:
While a PMS can offer you good returns over the longer run, the Kings of Capital PMS isn’t one to be considered at least for now for the following reasons.
- In an ideal situation, our returns should far exceed our initial investments. However, in this particular case, the PMS is falling far short of the benchmarks and sectoral funds that were compared earlier.
- The very purpose of bringing in these top-notch elite fund managers is to generate solid returns on your investments. However, when you’ve already paid a fee of around 1.5%-2.5% and haven’t seen any returns so far, it doesn’t sit well with investors, particularly those who got in early.
- Additionally, it is important to consider sector rotation, which can lead to extended periods of underperformance in certain sectors.
Marcellus Kings of Capital PMS or Mutual Funds?
- PMS investments in general may have limited liquidity compared to mutual funds. We may face restrictions or lock-in periods for redemption.
- Given the underperformance and the liquidity issues, you can opt for the less expensive thematic funds, just in case you are very particular about such a financial service focussed portfolio.
Conclusion
If you are seeking to diversify beyond mutual funds and pursue aggressive returns, it is advisable to look away from Marcellus Kings of Capital PMS and explore alternative options such as more consistent-performing PMS or thematic funds.
Please don’t fall prey to exaggerated opinions of Marcellus Kings of Capital PMS on social media platforms like Quora, Twitter Facebook, etc. Consult a professional financial planner for comprehensive and safe financial planning.
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