Valeant Holder Sequoia Fund Reopens to New Investors -- 2nd Update
April 29 2016 - 6:01PM
Dow Jones News
By Sarah Krouse
Sequoia Fund Inc., a mutual fund hurt by a large bet on
drugmaker Valeant Pharmaceuticals International Inc., is reopening
to new investors, according to a new filing.
As of Friday, Sequoia is open to new investors that buy shares
directly from the fund and to existing investors, according to the
filing. It isn't available through other sales channels.
The fund's managers said in a letter to shareholders last week
that they were "considering recommending to the board that Sequoia
reopen in the proximate future" after receiving requests from
interested investors.
Sequoia has suffered heavy withdrawals since late last year as
shares in Valeant, once its largest holding, plunged.
Clients have pulled more than $780 million from the fund so far
this year, according to research firm Morningstar Inc.
Sequoia had $5.3 billion in assets under management as of
Thursday.
Sequoia closed to most new investors in December 2013 because
managers felt it had reached maximum capacity for the strategy that
they wanted to pursue. Sequoia was also closed from 1982 until
2008, the last time the fund reopened, according to David Poppe,
the fund's lead portfolio manager.
There are currently 260 out of some 4,056 stock funds in the
U.S. that are closed to new investors, according to
Morningstar.
Assets in those funds represent about 12% of the total $7
trillion in equity fund assets under management.
Sequoia, which has historical ties to Warren Buffett, was
started in 1970 and places bets on undervalued companies. It has
done better than the broader S&P since inception, but has
lagged behind its peers recently. The fund lost 10.1% so far this
year through Thursday, according to Sequoia's website.
Kevin McDevitt, an analyst at Morningstar, said that when value
funds typically reopen they do so because managers see investment
opportunities in the market, but that Sequoia's reopening comes at
a time when equity markets are close to new highs.
"On the face of it, it seems less valuation driven than other
fund reopenings," he said.
Write to Sarah Krouse at sarah.krouse@wsj.com
(END) Dow Jones Newswires
April 29, 2016 17:46 ET (21:46 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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