MARCELLUS Little Champs

Fund Snapshot

Investment Philosophy

• First step of Marcellus Little Champs is to position stocks on each of the 12 ratios individually. These ranks are then accumulated through parameters to give a final order on the accounting standard of stocks.
• Objective of the Marcellus Little Champs investment team is to conduct research focused on 12 accounting ratios, including income statement (revenue/gains handling), balance sheet (correct representation of assets/gains), cash pilferage and quality audit checks.

Fees Structure:

Annual fixed fees of 1.5% (charged quarterly) Fees for performance: 20% of profits above a threshold of 10%. On the third anniversary, performance fees will be assessed on cumulative profits. The first 10% of annual returns (net of fixed fees) will not be subject to performance fees. Performance fees will be imposed without catch-up. Performance fees are based on the high water mark. Performance costs will be levied as of the redemption date if redeemed before the period of three years has expired. Exit Load: If redeemed in the first, second, or third year, respectively, it is 3%, 2%, and 1%. Investment requirement: 50 lacs

Performance

Except for Little Champs Portfolio, all performance data shown is net of fixed fees and expenses incurred through June 30, 2022, as well as net of annual performance fees incurred for client accounts whose account anniversary or performance calculation date falls up until the end of this performance period. The impact of this has not been taken into account in the performance data since Little Champs Portfolio performance fees are assessed on cumulative gains at the third anniversary of the corresponding client account.

Look for Hermann Simon’s celebrated ‘Hidden Champions

• SMEs, sometimes family-owned, produce unnoticeable goods yet are the best in the world at those goods.
• They often operate in narrow markets and create distinctive items utilizing exclusive methods.
• Operate quite near to the clients who depend on their products and find it difficult to switch suppliers.
• These companies’ competitive advantages are more often attributed to the quality, total cost of ownership, excellent performance, and tight client relationships than to cost leadership.

Unique Feature

• About 50 stocks have entered or quit the BSE 500 annually on average over the past ten years, showing a significant level of churn.
• The years before the stock is included in the BSE 500 index show the greatest relative outperformance.
• Find small-cap firms with a market valuation of less than US$500 million that have demonstrated sound corporate governance, a successful track record with capital allocation, and long-lasting competitive advantages based on brands, operational procedures, and strategic assets.

Methodology A Few Of Our Forensic Ratios

• 12 accounting ratios that examine cash theft, accurate reporting of assets and liabilities on the balance sheet, and revenue/earnings manipulation in the income statement. Consolidated historical financials spanning six years. Companies that score highest on each of the 12 measures separately (some examples are outlined in the table on the right). These rankings were then added together based on several criteria to provide a final ranking of the accounting quality of stocks. The renowned forensic accounting book “Financial Shenanigans” by Howard M. Schilit inspired the use of these ratios.