Valeant Holder Sequoia Fund Reopens to New Investors -- 2nd Update

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 [e-mail]

(END) Dow Jones Newswires

April 29, 2016 17:46 ET (21:46 GMT)

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