Marcellus Investment Managers has seen its Portfolio Management Services (PMS) assets under management (AUM) decline sharply by 64% from Rs 12,704 crore in October 2022 to Rs 4,734 crore currently. The primary reason? Valuation missteps in stock selection, as acknowledged by the firm itself.
In a post on social media platform X, Kanan Bahl, CA and Founder, Fingrowth Media, says investors flocked in initially following Marcellus’ founder, Saurabh’s philosophy of Coffee Can investing and buy-at-any-price (BAAP). I’m myself a big fan of his book, Diamonds in the Dust.”
However, in a recent newsletter to their investors, Marcellus admitted ‘valuation missteps’ as the key reason behind their flagship scheme’s underperformance, ‘Consistent Compounders’.
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“Now their BAAP philosophy meant that you should buy shares like Asian Paints, Page Industries, Pidilite, etc. at any price. This didn’t work. And the Consistent Compounders’ scheme returned a CAGR of just 9.07% vs 15.96% of Nifty50 TRI.”
Their small cap based scheme (Little Champs) returned 8.12% while BSE Smallcap 250 Index gave 31.97% CAGR in the last 5 years.
All this while, investors lost a lot. Not just in terms of performance but by paying heavy fee even as the funds massively underperformed.
“Marcellus net saved Rs 148.6 crore even after paying out salaries to their fund managers, all other key managerial personnels and dividends to their shareholders. In simple words, from the fee they charged to their investors, they saved Rs 148.6 crore after paying for all taxes and expenses like salaries, rent, commissions, etc,” Bahl writes, further asking, “Should there be a capping on the fee that portfolio managers can charge like we have for mutual funds?”
Arjun Somasundaran responded to Bahl’s post, expressing his view that the fund manager was swayed by the bull market.
“He became extremely popular. His books were selling like hot cakes. He was extremely positive in his comments about the economy and the country. He used to use the term ‘paise chhapna’ whenever he spoke. Today he seems too negative in his comments. He has a very pessimistic view of the country and middle class. We can’t trust managers who change their view based on the performance of their portfolio in the short term.
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