Sequoia Fund's nearly 30% position in Valeant Pharmaceuticals has highlighted the importance of concentration risk when setting defined contribution lineups.
Big bets: Among large U.S. open-end mutual funds, Putnam's Equity Spectrum and Fairholme had the highest concentra- tion in a single stock, after Sequoia.
Outlier: An analysis by P&I of mutual funds with at least $100 million in DC assets, and ranked by their weight in top 10 holdings, shows few instances of single-stock concentration.
Big returns: Sequoia Fund's strategy to “make concentrated commitments of capital” has result- ed in a very successful track record. But its net asset value recently fell 23% as the value of its largest holding (Valeant) dropped nearly 70% from its August high.
DC example: As of Dec. 31, Sequoia Fund was the second-largest single invest- ment in Disney's DC plans, and Sequoia's Valeant shares accounted for 1.8% of Disney's DC assets. Since then Sequoia has increased its stake from 20% to almost 29%.
*U.S. open-end funds with more than $1 billion in assets; excludes sector-focused funds. Sources: Morningstar; Department of Labor; Ruane, Cunniff & Goldfarb Inc.
Compiled and designed by Timothy Pollard and Gregg A. Runburg