353 / 708
15
Morningstar FundInvestor
August 2016
replacement rather than waiting around to see what
happens with the shareholder vote.
Sequoia Dumps Valeant
Sequoia
SEQUX
sold the rest of its shares of
Valeant
Pharmaceuticals
VRX
. “Valeant was our largest
position to start the year and its
80%
decline through
June
30
badly penalized our results,” management
wrote in a shareholder letter. “For the first half, Sequoia
generated a negative
13
.
2%
return vs. a positive
3
.
8%
return for the S
&
P
500
Index. Absent Valeant, the
rest of the Fund’s portfolio generated a positive
return of
2
.
3%
for the first half. At the end of this letter
you will find holdings data for the Fund’s
10
largest
holdings in Sequoia as of June
30
th. While we are all
disappointed by these results, we have responded
by changing our leadership and committing ourselves
to restoring the legacy handed down to us from Bill
Ruane and Rick Cunniff.”
Vanguard Core Bond Shows Promise
Morningstar Analyst Emory Zink shared these thoughts
on a relatively new fund from Vanguard: “
Vanguard
Core Bond
VCORX
—a member of the open-end inter-
mediate-term bond category—has popped up on
our radar. Launched earlier this year, the fund has a
short track record, but there are ample reasons to
follow its progress.
“First, each of the three named portfolio managers have
spent more than a decade at Vanguard and are
supported by the firm’s deep credit analyst, risk anal-
ysis, and economic research teams.
“Second, for an actively managed core fixed-income
product, its
25
basis point net expense ratio is one
of the lowest in the category—a trademark of most
Vanguard products.
“And third, the economies of scale offered across Van-
guard’s global operations have grown dramatically
in the last decade. That’s why this actively managed
fund is worth considering now.“
PIMCO Brings in Outsider to Be CEO
PIMCO
announced on July
20
that it hired a new
CEO
,
Emmanuel (Manny) Roman, most recently the chief
executive of Man Group, a London-based asset man-
ager focused on alternative investments. Roman will
replace current
CEO
Doug Hodge in the role effective
Nov.
1
,
2016
.
The firm embarked on a process earlier in
2016
to find
an executive with a strong strategic management
focus, and
PIMCO
says the effort eventually evolved
into the quest for a new
CEO
. A committee of
PIMCO
executives,including
CIO
Dan Ivascyn and president Jay
Jacobs, reviewed candidates, and the decision was
approved by
PIMCO
’s managing directors, after which
Allianz signed off on the selection. The firm claims
Hodge is supportive of the decision, and he will remain
at the firm indefinitely as a senior advisor to help
transition his responsibilities.
There’s been no indication that business management
was a problem during Hodge’s tenure, but he presided
over a difficult stretch for the firm, having taken over
as
CEO
when Mohamed El-Erian, who had been both
CEO
and co-
CIO
, departed in January
2014
. The firm
had already endured high-profile outflows—Morning-
star estimates that outflows at
PIMCO Total Return
PTTRX
from April
2013
through January
2014
were more
than
$47
billion—and Hodge had been in the
CEO
role for roughly nine months when Bill Gross left the
firm in late September of that year. Between then
and June
30
,
2016
, meanwhile, the firm’s overall assets
under management sank to
$1
.
5
trillion from
$1
.
9
trillion. Notably, those figures include roughly
$400
billion in presumably sticky assets the firm runs for
parent Allianz.
Although Hodge’s replacement was itself something
of a surprise, Roman’s hiring squares with the
business strategy on which
PIMCO
has focused of late.
The firm has been adamant about its commitment
to its large business in more-conventional fixed-income
strategies, including its flagship
PIMCO
Total
Return. It’s not surprising that alternatives have become
an increasingly large part of its focus in recent
years, though.
K