Sequoia Fund : First Opportunity in 25 years

[gryffindor]

One of the beneficial aspects of market turbulence is that there's been a whole wave of value funds opening their doors to the public as value becomes less popular again.

One of the "classic" Graham philosophy funds, the Sequoia Fund has been closed to new investors since December, 1982.

It is opening again on May first for an undetermined period of time. I've been waiting for this for a long time and plan on getting in.

Horrible fund if you want to track the market. Great fund if you want to buy your share of a few great companies and have some good experts track those companies for you. They're also planning on going more international in the future and kicking out all shareholders with have less than < 2.5k to minimize expenses. Not the greatest total admin costs of 1.02%

10k invested in the fund in 1970 would have grown to 2.1 M by 2007.

[RonBoyd]

Caution advised:

Mayday Mayday...Sequoia Fund To Reopen | MAXfunds.com

[ikubak]

Thanks for the heads-up. I checked out their website and noted unrealized appreciation represents almost half of the funds assets. If you choose to invest in this fund in a taxable account, you could get hit with capital gains if they sell some of their appreciated assets. Just something to consider if you want to buy this in a taxable account. I also noted Berkshire Hathaway represents almost 25% of the funds assets. As of 3/31/08, the fund was invested in only 24 companies.

[Nords]

Quote:

Originally Posted by gryffindor One of the beneficial aspects of market turbulence is that there's been a whole wave of value funds opening their doors to the public as value becomes less popular again. One of the "classic" Graham philosophy funds, the Sequoia Fund has been closed to new investors since December, 1982. It is opening again on May first for an undetermined period of time. I've been waiting for this for a long time and plan on getting in.

Every time I read about a fund opening (to a great fanfare of trumpets, with the sun coming out from behind the clouds as the rainbow appears), I have to wonder: If it's such a good fund, then why does it need to open to new investors? And how do the current investors feel about this?

No doubt the managers just have the best interests of their customers at heart. I also wonder if, as the asset base grows, management will be reducing the expense ratio. Not that I'm taking any bets on this one...

[Ronnieboy]

How about Dodge and Cox stock fund reopening. That has gotten a little fanfare.

[RonBoyd]

Quote:

Originally Posted by Nords No doubt the managers just have the best interests of their customers at heart.

When did that ever happen? My money is on the customers ranking way below the managers' best interests. (Pun intended.)

[RonBoyd]

Quote:

Originally Posted by Ronnieboy How about Dodge and Cox stock fund reopening. That has gotten a little fanfare.

This was covered in a thread back when it was first announced. Nevertheless, everything previously said in this thread applies equally as well.

[gryffindor]

The managers have said that the major motivation is that the average age of their investors has increased significantly (not surprisingly) -- and as a result the net cash flow is towards redemptions not purchases. This creates a big problem for the fund.

Clearly not a fund to buy outside of a Roth or tax-deferred account. But a fund closed for 27 years is still pretty intriguing.

Would love for the average expense to be lower.

[Nords]

Quote:

Originally Posted by gryffindor The managers have said that the major motivation is that the average age of their investors has increased significantly (not surprisingly) -- and as a result the net cash flow is towards redemptions not purchases. This creates a big problem for the fund. Clearly not a fund to buy outside of a Roth or tax-deferred account. But a fund closed for 27 years is still pretty intriguing. Would love for the average expense to be lower.

Riiiight, the redemptions are due to the age of the shareholders, not the fund's performance. I should've realized that. Heaven forbid Sequoia should have to ditch their losers or do some other sort of tax-managed selling.

It bugs me to hear a fund's cashflow problems being blamed on its shareholders. One would hope that the redemptions are due to just that and not to recent declining performance or management change or style drift or high expenses or any of the usual reasons for shareholder flight.

IIRC Ruane is the guy Buffett steered his investors to when he broke up his first partnership. I would think that if Ruane's staff had the best interests of their shareholders at heart then they'd liquidate the fund or allow existing shareholders to sell at NAV to other wannabe shareholders-- or at least break the shares into their "creation unit" components like an ETF will do for a fee. Existing shareholders could hold onto the result in a brokerage account and sell for a minimal fee whenever they wanted/needed to. But then I guess I'm describing a share of Berkshire Hathaway.

If Sequoia wanted to explore new investments then they could just set up a new fund.

But there's a lot of equity in Sequoia's record/reputation/brand, and clearly someone thinks it's worth cashing in on. I'm just not sure how this benefits the existing shareholders, although "average age" makes a convenient fig leaf.