Marcellus Little Champs Portfolio (LCP)
Investment philosophy and objective: To own a portfolio of about 15 sector leading small-cap franchises with excellent track record of capital allocation, clean accounts and high growth potential.
Market cap criteria: We focus on companies below market capitalisation of US$500mn. The median market cap of the current LCP portfolio is ~US$300mn.
LCP positioning relative to CCP: LCP will be essentially small caps portfolio whereas CCP would be large caps. An investor should expect more return but with more risk in LCP when compared to CCP. LCP given small size and low liquidity, will have more volatility vs CCP. Hence, bulk of the equity allocation (say 2/3rd) should go towards CCP.
Role of Equanimity: Equanimity is founded by Rajesh Sehgal, a veteran in emerging markets small cap investing at Templeton. He along with Mark Mobius bring their vast experience of assessing risk with small cap promoters and also establish a constructive advisory relationship with such promoters especially in areas of corporate governance and capital allocation. Such expertise will complement Marcellus’ deep research expertise to deliver a healthy risk adjusted return proposition to our clients
Investment horizon: Minimum investment horizon of three years given there could be quarterly or short term volatility in small caps fundamentals as well as share price performance. Rationale of longer-term horizon are to minimise the volatility/risks associated with small cap investing and to also minimise the price impact from redemption. Exit loads mentioned under the fees section below are intended to act as a deterrent from redemption before 3 years.
Minimum investment size: INR 50 Lakhs.Investors in Consistent Compounders can avail this strategy as long as the overall corpus with Marcellus exceeds INR 1cr and a minimum of INR 50lacs is invested in Little Champs.
|Fixed Fees||1.5% p.a.||Quarterly|
|(+)||Variable Fees||20% above hurdle rate (net of fixed fees) of 10% (without catch-up)||3rd Anniversary; annually from 4th year|
|Exit load||3%, 2% and 1% if redeemed in first, second and third year respectively along with performance fees if accrued|
Maximum Fund size: Taking into consideration the liquidity aspects of the portfolio companies, we intend to restrict the fund size to ~Rs300crs.
Will Marcellus follow a model portfolio approach? Or will different clients get different list of stocks depending on when they opened their account: We will follow the model portfolio approach.
Will funds be deployed into model portfolio immediately? Or will you take cash calls to time the entry points: We will endeavour to deploy the funds as immediately as possible subject to the liquidity in the stock.
What is the expected rate of churn in the portfolio :We would try to restrict the churn to 20-25% p.a.
Watch the LCP Launch webinar