The managers of the Sequoia Fund recently announced a 20% limit on investments in a single company at a recent shareholder meeting, as reported by the Wall Street Journal. The adviser moved the meeting to accommodate the 800 expected shareholder attendees – the large turnout expected in light of the fund’s large stake in Valeant Pharmaceuticals, and the steep performance decline and the heavy redemptions that the fund has suffered as a result of the investment. The meeting reportedly included a two and half hour presentation, with more than a quarter of the questions aimed at the fund’s investment in Valeant. Shareholders reportedly were interested in hearing how the fund’s position in Valeant got so big and what the fund planned to do to avoid a similar problem in the future. According to David Poppe, the fund’s current manager, “[t]here were people who were angry with us and let us know how hurt they felt, but in general the tone was respectful and productive.”
The fund’s investment in Valeant has reportedly led two of its former trustees to resign. However, the Valeant position is not the first time the fund has held a large position in a single security – in the early 2000s, Berkshire-Hathaway stock represented more than 30% of the fund’s assets. However, at the meeting, the fund’s adviser’s announced a change in the fund’s policies adopted by the fund’s new investment committee would prohibit the fund from investing more than 20% of its assets in a single security.