The relative outperformance of Marcellus Investment Managers during the worst selloff in Indian equity market since the Global Financial Crisis eventually became the catalyst for a blowout year for the PMS.
It became a point of attraction for investors that sought capital protection rather than glamorous returns given the uncertainty of the initial months of the pandemic.
Marcellus’ investment philosophy is an extension of Bob Kirby and Peter Thiel’s ideas. Mukherjea, who made the ‘Coffee Can’ style of investing popular in India, modified his strategy after leaving Ambit Capital. Marcellus now propagates bottom-up investment in companies with a superior capital allocation profile and goes for minimal portfolio churns to allow for long-term compounding.
“In order to navigate the vicissitudes of the market, investors need to build a portfolio of stocks that is not only resilient in times of crises but is also capable of seizing opportunities that arise when conditions normalise,” the PMS wrote to its clients in May, urging them to bank on its Consistent Compounders portfolio.
Success followed. In the June quarter of 2020-21, Marcellus added 199 new clients and grew its asset under management by 34 per cent. For the year ended March, Marcellus Investment went on to add 1,943 new clients with net inflow of Rs 2,435.86 crore.
Sebi data shows the PMS’ assets under management quadrupled in the 12 months to Rs 4,705 crore. That is said to include a large share of asset from offshore clients, too.
Just to put it in perspective, Marcellus Investment’s gravity-defying growth came in a year when the country’s largest portfolio management service, ASK Investment Managers, saw net outflow of Rs 329.34 crore.
The investment philosophy alone has not been the secret to this success. The PMS is known for its aggressive communication strategy, not only with clients but with the market, too. Marcellus and its core investment team produce several newsletters, blog posts and make regular appearances on business news channels to communicate their strategies and investment ideas to potential clients.
The marketing strategy is direct and with no frills, but it’s nothing less than a blitzkrieg. “Clients really understand what they are saying, and the fact that they value research, knowledge,” an industry insider said, requesting not to be named.
However, what began as outperformance has turned into underperformance for the PMS as the financial year came to a close. A sharp acceleration in returns in the broader market caused Marcellus Investment’s more concentrated and quality-oriented portfolio to underperform. In 2020-21, its two major portfolios — Consistent Compounders and Little Champs —underperformed their respective benchmarks.
When reached out, Marcellus Investment did not share any comment for this analysis.
“Marcellus has become a cult like Raamdeo (Agarwal), Prashant Jain used to be. They are not doing anything different in terms of portfolio, but the whole cult is what has driven the success,” said the industry insider quoted above.
The cult of Mukherjea and his fund management style has ensured no dent to his fund’s popularity or ability to attract clients despite the recent underperformance. The PMS, as a matter of fact, recorded net inflows of Rs 302.7 crore in March alone.
Marcellus Investment has taken less than three years to match the client base of the industry’s largest player, and it will surely try to ride on the investors’ preference for steady performers amid the Covid uncertainty to catapult itself into the pantheon of the Indian PMS industry.
