Marcellus Little Champs PMS: Should You Consider Investing? An In-Depth Review

“Catch them young”

This proverb does not apply only to our children but to Indian financial markets as well!

You would have definitely come across statements like,

“Rs 10000 Invested In 1993 Infosys Ipo Is Now Worth Rs 4 Crores”.

“If I had invested “Rs 10000 in 1980 on WIPRO, I would have Rs 535 crores now!” and so on.

These companies were small champ companies and were just starting to gather pace in the 1990s and now have grown into huge conglomerates amassing wealth for investors. Imagine the potential of small-cap companies!

In this article let us review one such product offered by Marcellus called “Little Champs”.

Just in case you weren’t sure about what a PMS is, you can click What is a Portfolio Management Scheme to know more about this.

Let us now make a detailed study of this PMS and benchmark it with the indices to analyze its pros and Cons to see which is a better option.

Let us get started!

Table of Contents:

Who is Marcellus?
Wealth Creation Process of Marcellus
Overview of Marcellus Little Champs
Fee Structure
Who can invest in Marcellus Little Champs PMS?
How are the companies filtered by Marcellus Little Champs PMS?
Marcellus Little Champs Portfolio Returns Vs Benchmark Returns – Comparison Review
Marcellus Little Champs Portfolio Returns Vs Small cap Fund Returns – Comparison Review
Marcellus Little Champs vs Marcellus Consistent Compounders
Final Verdict on Marcellus Little Champs:

Who is Marcellus?

Marcellus Investment Managers is a boutique portfolio management service based in India. They specialize in managing equity portfolios for high-net-worth individuals (HNIs) and institutional clients.

Marcellus focuses on long-term wealth creation through an investment philosophy centered around quality and sustainability.

Wealth Creation Process of Marcellus

They follow a concentrated approach, investing in a select number of high-quality companies with durable competitive advantages and strong management teams.

They believe in a bottom-up research-driven investment process, conducting an in-depth analysis of companies and their fundamentals.

What is the objective of Marcellus?

They aim to identify businesses that can generate superior returns over the long run.

Will they accomplish this with the new Little Champ? Let’s see!

Overview of Marcellus Little Champs 

• The minimum investment amount is ₹ 50 lakhs.
• Marcellus’s Little Champ consists of small-cap companies with a niche of the strong moat and sustainable growth.
• Basically, they Identity small-cap companies (market cap <US$500 million) with excellent corporate governance, capital allocation, and track records, with strong sustainable competitive advantages built around brands, business processes, and strategic assets.
• These companies are all sector-leading franchises with a stellar track record of capital allocation and have  Clean accounts and corporate governance and of course high growth potential.

But how much do you have to pay to avail of these services? Let’s see!

Fee Structure:

Top 5 Holdings:

Sector Allocation:

Market Cap allocation:

Who can invest in Marcellus Little Champs PMS?

An ideal investor who can invest in Little Champ PMS should have the below criteria.

• Having a high-risk appetite.
• Highly patient investor
• You are ready to invest a minimum of ₹ 50 lakhs.
• You have a longer time horizon for investment.
• Trusting the PMS and the fund manager until you arrive at your corpus.

Do you have these qualities? Even if you have all of these, is it really worth your money and time? Read through to find out more about Marcellus Little Champs.

How are the companies filtered by Marcellus Little Champs PMS?

Marcellus Little Champs PMS performs a 5-stage filtration to arrive at their stocks.

Stage 1:Starting from a universe of more than 1000 companies they first filter out the stocks with <$500mn

Stage 2: Weeding out Naughty companies.

Marcellus study the companies filtered in stage 1 with further credential checks by taking into account 12 accounting ratios covering income statement (revenue/ earnings manipulation), balance sheet (correct representation of assets/liabilities), cash pilferage, and audit quality checks. Six years of historical consolidated financials are also taken into account.

Stage 3: Selecting top stocks

The companies selected in filter 2 are further filtered and only the cream of the crop(Top 20%) are included to avoid companies that are struggling to cover their capital cost and debt-laden companies

Stage 4: 

Marcellus then does a detailed analysis of annual reports, con calls, management interviews, and other published reports to further substantiate their claim on the selected stocks.

Stage 5:  In the final stage, they look for 3rd party checks in addition to the company-provided information.

Instead of relying solely on company-provided information, Marcellus conducts independent research.

They also seek out information from industry experts, suppliers, customers, competitors, and other sources.

This approach will help to gain a more comprehensive understanding of the company’s operations, market position, and management quality

Finally, 15-20 stocks are selected from a whole universe of more than 1000+ companies.

Now let’s compare the returns of this “Little Champ” with others.

Marcellus Little Champs Portfolio Returns Vs Benchmark Returns – Comparison Review

The Marcellus Little Champs portfolio has given us negative returns over the last 1-2 years. As a result of the bull run the 3-year returns are positive.

Now let’s compare and see how Marcellus Little Champ’s portfolio has performed with its benchmark index.

Below is the comparison of the Marcellus Little Champs PMS’s  Returns as of May 31, 2023.

Looking at the performance of the PMS performance, it has constantly underperformed

even the benchmark of the BSE 500.

The returns since the inception are also at par with the benchmark index.

For any PMS the returns have to be up and over the benchmarks indices. But that is not the case as we see here.

While the returns are at par with the benchmark index, the same is the case with the drawdowns as well.

So looking at the comparisons of the returns with the benchmark index, this PMS has underperformed massively.

The same level of returns with less risk, so what will be a wise choice is a no-brainer!!

Marcellus Little Champs Portfolio Returns Vs Small cap Fund Returns – Comparison Review

Ok, the Marcellus Little Champs portfolio didn’t beat its benchmark index. But how did it fare against its small-cap counterparts?

Now let’s go a step further and do a comparison with the BSE Small Cap TR fund over the same time period and see if we were able to beat it.

As we see above, baring the last 1 year.

The Marcellus Little Champs has failed to even beat the BSE small cap’s return. Though the Marcellus Little Champs have put up a spirited performance with an impressive annualized return of 30.97% since 29th August 2019.

This is almost on par with the return of 31.69% given by the BSE Smallcap Index in the same period.

Let alone this, compared with the actively managed small-cap funds there is a wider gap between the Marcellus Little Champ PMS returns and the funds over 3 years.

It is important to note that the returns mentioned earlier are pre-tax returns.

When factoring in capital gains tax, the overall return would be lower, resulting in a change in the post-tax return figure. Additionally, in terms of taxation, PMS tends to be less tax-efficient compared to mutual funds.

You can understand how PMS and MFs are taxed here to better understand it.

Marcellus Little Champs vs Marcellus Consistent Compounders 

Both the PMS have a minimum investment of 50 lakhs.

Marcellus’s Little Champ consists of Small-Cap companies with a niche of strong moat and sustainable growth while Marcellus Consistent Compounders predominantly focuses on Large-Cap funds.

To read the complete detailed review of Marcellus Consistent Compounders Portfolio click below

Marcellus Consistent Compounders Portfolio: PMS Review- Should you Invest?

Final Verdict on Marcellus Little Champs:

As the name says, the Marcellus Little Champs PMS is still very young at around 3 years of age. While PMS can offer you good returns over the longer run, the Marcellus Little Champs PMS isn’t one to be considered at least for now for the following reasons.

• What is the point of all the risks if the proportion of value earned to risk is not equal and you are not even beating your benchmark?
• The returns generated should be up and over the fee you pay. We are paying a fixed 1% per quarter and a variable fee based on the returns generated. Right now, the returns are negligible.
•  If you had joined the PMS in the initial stages you would have been paying only the fee without earning anything.
• The purpose of paying additional fees and employing a skilled fund manager is to outperform the index rather than underperform it.
• It is better to jump to a small cap fund with a much lesser fee(Expense ratio) rather than paying such huge PMS fees.
• Marcellus Little Champ PMS are also not tax efficient when compared to mutual funds. Mutual funds are taxed only when you redeem. But in the case of the PMS, whenever the fund manager makes a change we will be taxed in the particular financial year.

If you want to really diversify your investment portfolio to get aggressive returns, then please avoid Marcellus Little Champs Portfolio and look out for a better and consistently performing PMS or AIF.

These days there is a wide range of amateur advice available on social media platforms like Quora, Twitter, Facebook, etc. Please don’t take important financial decisions by just surfing through social media. Please consult a professional financial planner for reliable advice.