An exclusive webinar was recently held on YouTube. On the other side of this YouTube webinar, two prominent personalities were present: Mr Krishnan V. R. and Mr Omkar Sawant. Mr Vikas Agrawal hosts the webinar. He is the Founder and CEO of AIF & PMS Experts India Pvt. Ltd. Mr Krishnan V. R. is the CFA of Quantitative Research at Marcellus Investment Management, and Mr Omkar Sawant is the CA and the fund manager of Marcellus MeritorQ PMS.
Webinar Overview
- This webinar is specially organised for the launch of a new PMS fund of Marcellus, MeritorQ PMS. The agenda of this webinar is to give investors more details about the newly launched PMS and answer the queries of the webinar participants.
- Marcellus MeritorQ is available both under the PMS platform as well as advisory.
- Their PMS strategy is more quantitative rather than a qualitative side.
- Their core principles have yet to change as a firm, so there are three layers. These are competitive advantages, clean accounts and consistent profitability.
- They talked about their timeless principles. They also discussed the lessons an individual investor can receive from Michael Lewis’ best seller.
- Hence they throw some light on rule-based portfolio construction and investing. Their strategy refreshes the portfolio every six months. Therefore, investors will see the actual portfolio construction steps.
- Our webinar guests, Mr Krishnan V. R. and Mr Omkar, described how their forensic framework and rule-based approach work together.
- They had a detailed discussion on their portfolio’s characteristics.
- They presented a graph based on their backtest performance. Here, you can see how their MeritorQ performed well compared to the returns of Nifty 500 TRI. They have a value of 19.9X, whereas, Nifty has a 7.3X return.
- They also showed a graph that depicted how MeritorQ had lower drawer downs and recovered faster. It is based on March 2020 and Global Financial Crisis.
- Then they talked about the significance of the rebalancing. Rebalancing is done twice a year, effective on the first trading dates of April and October. It ensures that the portfolio is first aligned with the investment objectives and strikes the right balance.
- As per them, semi-annual rebalancing strikes the right balance between not increment churn and regular picked-up stocks.
- Marcellus never invests in such stocks having corporate governing issues.
- Mr Vikas and our honourable guests talked about the rolling returns.
About AIF & PMS Experts India
We are a firm that specialises in multi-asset Alternative Investments. Some of our core services include portfolio management, public equity (listed and unlisted), venture funding, private debt structured products, and real estate alternative investments.
Our objective at AIF & PMS Experts India is to foster long-term wealth creation for our clients by instilling trust in governance, enhancing transparency, and facilitating long-term wealth growth. Our numerous products, predictive analysis, and tools are critical to our company or organisation and aid us in achieving our objectives.
Fund Manager Profile
Mr Omkar worked with a CA firm in statutory audit departments from 2017 to 2020 before joining Marcellus, gaining vast experience in Indian accounting principles, financial statement analysis, and taxation.
Omkar is the MeritorQ PMS Fund Manager at Marcellus. Mumbai University awarded him a BCom. He has a chartered accounting certificate.
CFA Profile
Krishnan has nearly ten years of experience in both equity and fixed-income research. Before joining Morningstar, Marcellus worked on the New Indexes Development team, creating multi-asset investment products based on quantitative criteria.
Prior to joining Morningstar, he worked as an equities analyst for D.E. Goldman Sachs Asset Management’s (GSAM) EM Corporate Debt Team and Shaw & Co. Krishnan has a postgraduate diploma in management from IIM Kozhikode and a master’s degree in financial engineering from Worldquant University.
Investment Philosophy
MeritorQ PMS uses a rules-based strategy to screen for companies with low leverage and consistent profitability that pass the quantitative forensic accounting framework developed by Marcellus. From this list, approximately 35-45 profitable and relatively mispriced companies are chosen to form the final portfolio.
Based on stated portfolio optimisation guidelines, the portfolio is reconstituted semi-annually on the first trading day of April and October.
Important Characteristics of The Fund
- Long-only portfolio based on good investing principles and a quantitative + fundamentals approach.
- Stocks chosen for the portfolio are usually held for at least a year. Approximately 50% annualised turnover was observed over a 16-year backtest period.
- Select reputable companies that are undervalued compared to the rest of the market.
- Rather than just one or two stocks, concentrate on your portfolio, which provides better risk-adjusted returns.
- Every two years, rebalance the portfolio by adding undervalued companies.
- Using a rules-based strategy alongside Marcellus’ forensic framework.
- Holds a 35-45 stock portfolio diversified across large, mid, and small-cap segments and several factors.
- Over time, a 40-60% allocation to small and mid-cap stocks has been observed.
- 20-30% allocation to the top five stocks
- There are no restrictions on single stocks or sectors because the goal is to select the best companies that are both profitable and undervalued.
- There needs to be more leeway in the portfolio construction process. There is no risk of a star portfolio manager.
- Best suited for investors with a time horizon of more than three years.
Few Timeless Principals of MeritorQ
- Purchase reputable corporations:
Solid financial condition and a high return on capital,
Clean accounts.
- At prices below intrinsic value:
A discount to intrinsic value in comparison to the rest of the market,
Intrinsic value based on free cash flow.
- Reduce human biases:
Avoid behavioural biases by processing before making a decision.
Investing Principals of MeritorQ
- Long-only portfolio,
- No leverage,
- No derivatives and
- Marcellus’ exclusive forensics framework.
Backtested Performance
| Period: July-2006 to Aug-2022 | BSE 500 | Strategy |
| CAGR(%) | 11.6 | 20.3 |
| Risk (%) | 23.2 | 22 |
| Downside Risk (%) | 16.9 | 16.2 |
| Return/Risk | 0.5 | 0.92 |
| Return/Downside Risk | 0.29 | 0.84 |
| Maximum Drawdown (%) | -66.4 | -59.4 |
Rolling Returns
| Average 36months rolling returns | 10.2 | 21.9 |
| Average 36months rolling risk | 21.3 | 20.4 |
| Average 36months rolling return/risk | 0.57 | 1.22 |
Webinar Key Points
- Rebalancing is important for constructing your portfolio.
- Sometimes the market goes through a down-cycle, but MeritorQ has the power to recover faster.
- Through the backtested data, MeritorQ has the potential to give more returns than Nifty.
Parting Note
If you are enthusiastic about investing in alternative investments, you may require clarification on common misconceptions. In that case, you can seek advice from AIF & PMS Experts India Pvt. Ltd. We always give our investors unbiased and skilful advice about their investing journey. You can visit our website: https://aifpms.com/contact/ and email us at [email protected].
You may also like call the following numbers:
8368586435, 1800 210 1995 and 020-48627339.