Marcellus acknowledged that the portfolio performance (pre-fees) should have exceeded the EPS CAGR by a reasonable margin and they have fallen short in this regard.
Leaning on his past examples, where Mukherjea acknowledged that he failed multiple times in various aspects of his life, and the learnings from which have only held him in good stead.
“My first failure that I can remember was failing Hindi in Class 3 in St Columba’s School, New Delhi. Thereafter, my life has been littered with failures eg. failing to make it to the school cricket team, failure to get into some of the colleges in which I wanted to study, failure to get the jobs that I wanted, failure to win the deals that I wanted, failure to write the books that I wanted to write, and most recently, failure to beat the market over the past 3 years,” Mukherjea wrote in a LinkedIn post.
Mukherjea said his resolve was strengthened 15 years ago when he read what Danny Kahneman had once remarked to journalist Jason Zweig, “Do you have any idea how lucky you are to have thousands of people who can tell you you’re wrong? “
“Please keep the criticism coming. My colleagues at Marcellus Investment Managers and I will be the wiser for it,” he said.Marcellus Investment has seen its PMS AUM decline sharply by 64% from Rs 12,704 crore in October 2022 to Rs 4,734 crore currently.The fund’s marquee consistent compounders portfolio has delivered a return CAGR of 17.4% over FY19-24, which is broadly in-line with the portfolio’ EPS CAGR of 17.8% in the same period.
“There are a few learnings around valuation changes which we could have incorporated sooner than we did for example de-rating of quality lenders over the last 3 years as their ROEs moderated amidst changes in the regulatory environment and the risk of an unwind of peak valuations of quality businesses in general from their 2021 highs,” the fund manager said in its latest newsletter.
Whilst portfolio performance was tracking this earnings growth till September 2024, it expects the drawdown of the last three months to be temporary in nature with prospects of reversal in future.
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