Our goal at Marcellus is to make generating money easy and accessible. We do this by employing reliable and open capital allocators. The principles of Kirby and Thiel served as the foundation for our philosophy at Marcellus, which we have since further developed. To benefit from long-term compounding and provide greater returns, we hold firms for extended periods of time with little to no turnover. Before being included in our investment portfolio, every firm in it must pass a stringent and demanding filter.
|Type of Fund
GCP Portfolio Is Built On Three Mega Themes
- Pick and shovel: Pick and shovel companies provide essential tools and services for specific industries – insulated from market share vagaries
- Utility: Modern utilities are unregulated essential services with a sticky user base, high pricing power and recurring revenues
- Consumption: Consumption themes focused on the premium end, benefiting from a rising share of wealthy households
GCP characteristics: Beyond Tech, High Longevity and Aligned Management
- On average 60+ years of existence 30+ years of greatness
- Oldest Company in GCP Portfolio 180+ years
- Youngest Company in GCP Portfolio 25+ years
- The majority of GCP type companies have 30-60% higher longevity than average S&P 500 company
GCP’s Sectoral Allocation
- Family Run Businesses: 40%+ of GCP are family run
- Aligned Management: GCP companies’ mgmt. Teams heavily incentivised through stocks
- Stickiness: GCP Companies have Pick & Shovel / Utility characteristics
- Tech Exposure: 15-25% though cycle
High Cash Generation Leads To Virtuous Cycle Of Wealth Creation
Asset Light + Predictable Cashflows + Efficient Capital Allocation = Maximum Value Creation
- Thorough, independent primary data checks help deepen understanding of moats, capital allocation and governance
- Quantitative scoring of qualitative factors as well as potential risk factors
- Complemented by quantification and longevity of growth
- This drives final stock selection for inclusion in the portfolio
Strong & predicable cashflows for Re-Investment
- Capital expenditure (Organic growth)
- Return of capital to shareholders
- Acquisitions (Inorganic growth / new capabilities)
TORQUE: Proprietary Framework To Benefit From Extreme Dislocations
- The actual intrinsic value of quality companies changes at a relatively predictable rate.
- However, market perception of fair value goes through extremes occasionally.
- Torque attempts to benefit from these extreme changes in perception.
GCP expected return breakdown
The universe: Stocks in the US Listed Large & Mid-Cap / Developed Europe
- Fundamental parameters & Forensic Accounting
- Bottom-up research
- Independent third-party checks
- Portfolio construction
- 2-3% alpha over S&P500 80–85 stocks selected
- 2-3% alpha over S&P500 Qualitative Analysis Of Fundamentals.
- 40–50 Stocks selected 2-3% alpha over S&P500 Style Framework (Torque) and Valuation 20–30 Stocks selected
- Historical consistency of healthy revenue growth, profitability, and cash generation
- Analysis of annual reports, management interviews and other published reports in public domain Independent channel checks to verify management claims and to form a view on capital allocation and governance
- Converting qualitative parameters into a quantitative framework for position sizing and portfolio concentration
- A process-driven fundamental investment approach to identify and invest in:
- Dominant exceptionally run businesses
- Best in class global capital allocators
- Proprietary portfolio construction – TORQUE framework – to support risk mitigated wealth creation journey.
About Fund Manager
Arindam Mandal, Global Fund Manager
In 2022, Arindam joined Marcellus. Arindam worked for Principal Global Investors (PGI), a company that manages around $100 billion in public stocks, for nearly ten years in the United States. He worked as a Senior Analyst covering a range of industries, including industrials, financials, and utilities, for the US and Global Investment Strategies and then for the Emerging Market Strategies. Arindam had previously served as a lead software engineer on the Oracle Corporation’s product development team. Arindam graduated from NIT Warangal with a Bachelor of Technology in First Class with Distinction. He graduated with distinction from Duke University’s Fuqua School of Management with an MBA in finance.
Key Information - Structure
- Investment Manager-Marcellus Investment Managers GIFT City branch
- Regulator – International Financial Services Centres Authority (IFSCA) formed under Act of Parliament viz. International Financial Services Centres Authority Act, 2019
- Indian Residents can remit up to USD2,50,000 per year per person under the Liberalised Remittance Scheme (LRS) of RBI.
- Tax Collected at Source (TCS) by the remitting bank for LRS is 5% of the remitted amount (20% with effect from July 1, 2023).
- Minimum Ticket Size for investment in GCP: USD 1,50,000
- Tax related information: For any foreign security held for not more than 24 months, tax on STCG shall be payable @ 30% + surcharge & cess. For foreign securities held for more than 24 months, gains shall qualify as LTCG and shall be taxable @ 20% with indexation benefit. Dividend shall be subject to tax at tax rates applicable to respective investors. Foreign jurisdictions where securities are traded may also withhold taxes. Credit of such taxes will depend on the tax treaties India may have with such countries and tax credit rules in India. Please consult your tax advisor for assessing the tax implications applicable to you.
- Preferred mode of holding: Joint holding (to avoid any estate tax implications in US in case of death of the single holder)
Business Score – Quantify Qualitative Aspects
- Historical fundamental filters – Consistency of growth and returns
- Marcellus Forensic Accounting
- Moat score: Strength of today’s pricing power – FCF (CFO – Capex) return on invested capital > Cost of equity
- Stewardship score: Execution, Capital Allocation
- Decentralized execution
- Consistent deepening of moat
- Quantify revenue growth related to expected market share gains
- Profitability and asset turns – expected to improve meaningfully
- Drivers of compensation
- Growth score: Normalized FCF growth and growth durability
- Total return potential for next 5–15 years
- How long it can outgrow an average company in S&P 500
- Nature of compounding – Cyclical (Specific Drivers)/Growth
- Terminal risk score: Disruption risk
- Internal: Experimentation / investments towards adding new moated revenue growth drivers
- External: Attempts at radical disruption of the industry’s future
- How conducive are external and internal parameters to ensure a predictable future?
- Idiosyncratic risk score: Softer risk aspects
- CXOs – quality and tenure
- Historical evidence of succession planning in CXO roles
- Independence of Board of Directors
- Predictability of Cash Flows
- Financial Engineering / Leverage
Disclaimer: Investing Involves Risk. This document is for information purposes only and should not be viewed as a legal offering document or solicitation. Offers to invest in this fund are made only by the Discretionary Portfolio Management Services Agreement. Past performance does not guarantee future results and there is no assurance that the managed accounts will necessarily achieve their objectives. We do not guarantee any returns in the hand of investors not we take any sort of accountability for the performance of the scheme. The above-mentioned data is collected from the respected Fund house please verify the same at SEBI website.