BRK.A Berkshire Hathaway Inc

The leadership of a mutual fund hurt by an oversized position in one stock—Valeant Pharmaceuticals International Inc.—on Friday promised hundreds of investors gathered at the Plaza Hotel in New York that it will cap the size of large stakes in the future.

In the meeting, the managers told shareholders they'd put in place a new 20% limit on the percentage of the fund that can be invested in a single security. The change was adopted by a recently formed investment committee. The fund didn't previously have a percentage limit.

Executives at Ruane, Cunniff & Goldfarb Inc.—which run the Sequoia Fund that had invested in Valeant—took the stage at a hotel ballroom around 10 a.m. and spent about 2½ hours on a presentation to shareholders and fielding questions. More than a quarter of those questions related to Valeant, people at the meeting said, adding that some questions were tense.

"There were people who were angry with us and let us know how hurt they felt, but in general the tone was respectful and productive," said David Poppe, the lead manager of the fund.

Mr. Poppe became president of Sequoia after longtime manager Robert Goldfarb resigned in March. "Hopefully people came away at least feeling that we'd addressed their concerns directly," he added.

Among the questions asked Friday was why Mr. Goldfarb wasn't at the meeting. Mr. Poppe said he told the shareholder Mr. Goldfarb had retired.

Sequoia's managers expected about 800 people to attend and the crowd spilled over into a side room with a television monitor. The firm said it selected the Plaza, at the base of Central Park over its typical venue, the St. Regis Hotel, to accommodate a larger crowd. Attendees had to be shareholders and present a ticket to enter.

The value fund was hit hard by a heavy exposure to Valeant, which at one point last year accounted for more than 30% of its portfolio. Shares of Valeant have declined 73% this year amid questions about its business and accounting practices.

The fund had about $5.1 billion in assets as of Thursday, according to Morningstar Inc., and investors have pulled about $860 million out so far this year.

The Valeant position wasn't the first time a stock represented more than 20% of Sequoia. In the early 2000s, Sequoia's investment in Warren Buffett's Berkshire Hathaway Inc. represented more than 30% of its portfolio.

For investors, the two main questions were: How did the large position in the troubled drugmaker get so big? And what will the fund's managers do to avoid such troublesome stakes in the future?

Michael Hyman, who invested in the fund several years ago because his parents were shareholders, said he sold some of his shares more than a year ago. At the time he was concerned over its concentration in Valeant and the drug company's business model. He said managers of the fund were "fairly direct" during the meeting.

"I still have faith in Sequoia," he said.

(END) Dow Jones Newswires

May 20, 2016 18:05 ET (22:05 GMT)

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