At Marcellus, the Purpose is to make wealth creation simple and accessible by being trustworthy and transparent capital allocators.
The investment philosophy at Marcellus has evolved from the ideas of Kirby and Thiel, which they have refined further.
The investing approach has 3 pillars:
Clean Accounts: They have quantitative frameworks which use a combination of forensic accounting and capital allocation assessment define our investible universe.
Capital Allocation: They look for companies with superior track record of capital allocation – companies that generate free cash flows and reinvest them in the business to fuel further growth.
Competitive Advantage: The experienced investment team through in-depth primary research, constructs a portfolio of companies with deep competitive moats.
These companies are then held on for long periods of time with little or no churn, which allows them to capture the benefits of long-term compounding and deliver superior returns.
Given the inherently leveraged business models of financial services companies, the importance of each of these traits is further amplified and therefore one can put skills around forensic accounting and understanding barriers to entry to good use to create a portfolio of high quality financial services stocks.
Keeping this in mind, the Marcellus team have created a portfolio of high-quality lenders, general insurers, life insurers, asset managers and brokers.
They believe there is a massive opportunity for the banks and NBFCs in the Kings of Capital portfolio to consolidate market share as these are well run lenders with adequate capital to not only absorb NPAs but also grow post the crisis. As per RBI’s households survey, 95% of Indian wealth is in physical assets with only 5% being in financial assets. The non-lenders (insurers, asset managers and brokers) in the Kings of Capital portfolio therefore have a large structural opportunity to benefit from the financialization of Indian household savings.