The Risk Impact Of Valeant Pharmaceuticals Intl Inc (VRX) On Sequoia Fund

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The Risk Impact Of Valeant Pharmaceuticals Intl Inc (VRX) On Sequoia Fund

The Risk Impact Of Valeant Pharmaceuticals Intl Inc (VRX) On Sequoia Fund by AlphaBetaWorks Insights

“This is your fund on drugs”

The Sequoia Fund’s (SEQUX) hefty sizing of Valeant Pharmaceuticals (VRX) dramatically changed the fund’s risk profile from historical norms. With the proper tools, allocators would have noticed this style drift back in Q2 2015 when Sequoia’s key factor exposures moved two to three times beyond historical averages. What’s more, allocators would have noticed a predicted volatility increase of 25% and a tracking-error increased 70%. Though this analysis would not have anticipated Valeant’s subsequent decline, it would have warned fund investors that Sequoia’s risk was out of the ordinary. 

Sequoia Fund’s Risk Profile

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Screenshot 2022 08 10 18.57.51 1Since its founding by Will Thomson and Chip Russell in June 2016, the Massif Capital Real Asset St