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Chuck Jaffe: How A Big Bet On One Bad Stock Broke A Legendary Mutual Fund

TedTed
edited March 2016 in Fund Discussions
FYI: (This is a follow-up to the follow-up to the follow-up, I think Chuck's a little late to the party !)

In the stock market, there are bad times — and then there is what the Sequoia Fund is going through.

Bad doesn’t even begin to describe the situation for Sequoia SEQUX, -0.64% one of the most legendary mutual funds, which has seen its reputation torched by a bad bet on a controversial stock. The fund’s fall from grace culminated in the resignation of a co-manager after a 45-year career with Sequoia’s management company
Regards,
Ted
http://www.marketwatch.com/story/how-a-big-bet-on-one-bad-stock-broke-a-legendary-mutual-fund-2016-03-26/print

Sequoia's One Year Performance As 3/24/16: Source M*
1-Day (-0.64)
1-Wk. -(0.13)
1-Mo. -(7/19)
3-Mo. -(14.13)
YTD -(11.55)
1-Yr. -(24.03)

Comments

  • heezsafe
    The fund’s annual shareholder meeting will take place on May 20 in the Grand Ballroom of the Plaza Hotel in New York City.
    Come, join the fun!:)
  • beebee
    edited March 2016
    Please check my math:

    With $5.5 Billion AUM, SEQUX with its 1% ER nets $55 million in annual fees. These annual fees are obviously impacted by recent poor fund performance, but in a year when shareholders absorb a 25% share price loss, management will still collect close to $46 million in fees (based on 25% less assets under management due to a 25% drop in the fund's share price).

    Share holders selling out of this fund would cause a 100% management fee loss and might be about the only way to properly voice their disapproval of management decision making.
  • TedTed
    edited March 2016
    @bee & MFO Members: In addition to bee's math, on this date,3/26/15, one year ago SEQUX was selling for $252.00 per share.
    Regards,
    Ted
  • Tony
    bee, it seems to me that SEQUX will be collecting $46 million in annual fees when and if their AUM goes down to $4.6 billion (and the ER is 1%). According to fundmojo.com, AUM as of 02/2016 was $6.04 billion, and AUM as of 05/2015 (the oldest date listed) was $9.04 billion. I believe that AUM decreased because of the drop in share price and shareholder withdrawals.
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