Everything is good until it isn’t

Sequoia fund was a superstar.

More than 40 years old. Decades of outperforming it’s peers. The best of the best. The gold standard. Exceedingly well run. Managers with loads of experience. You get the picture…

Then it all went wrong.

Specifically, one of their holdings (Valeant Pharmaceuticals) dropped 93% between August 2015 and June 2016. To massively compound matters, Valeant made up a whopping 32% of Sequoia fund assets before the drop.

In the course of twelve months, more than a decade of out-performance was wiped out.

Since August 2015, the fund is down by more than a third, while it’s benchmark (S&P 500) is up by more than 30 per cent.

The thing is, nothing had changed at Sequoia fund. The management hadn’t changed (it has since). Processes hadn’t changed. Due diligence systems hadn’t changed. Arguably, their processes and due diligence were better than many other funds.

Yet it still happened and if it can happen to them…

That is why for most expat investors owning a broadly diversified portfolio of index funds, covering different asset classes, geographies and industry sectors is likely to be the best approach.


Further reading:

The stock that ate wall street

Sequoia fund tries to recover from Valeant misstep