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Thursday, March 24, 2016

Goldfarb Falls On His Sword

Reported by Neil Anderson, Managing Editor

An independent value mutual fund boutique's star PM/CEO is stepping down in the wake of a bad bet on a now famously-troubled pharamceutical company.

Robert Goldfarb
Ruane, Cunniff & Goldfarb
Chief Executive Officer
David Poppe confirms in a shareholder letter that Ruane, Cunniff & Goldfarb [profile] CEO Bob Goldfarb, 71, is retiring on March 31. Poppe, 51, who has co-PMed the New York City-based shop's flagship Sequoia Fund alongside Goldfarb for the past decade and serves as executive vice president of the company, will succeed Goldfarb in leading both the fund and the company.

Bloomberg, the Financial Times, Morningstar and the Wall Street Journal all picked up on the news.

In the letter, Poppe calls Goldfarb "a uniquely brilliant student of business," while highlighting Ruane, Cunniff & Goldfarb's strong long-term track record.

""We owe our success first and foremost to a simple but powerful strategy: The careful selection of a focused portfolio comprised of intensively research investments, purchased with a margin of safety," Poppe writes.

Goldfarb's departure comes amid the continuing woes of a big Sequoia portfolio company, Valeant Pharmaceuticals International, whose shares have plunged 67 percent year-to-date. The fund sold about 1.5 million Valeant shares last week. Morningstar has put the $5.6-billion, three-star Sequoia Fund "under review."

"While we have beaten the market over the past decade, through the end of 2015, our investment in Valeant has diminished a record that we have built over two generations and in which we take great pride," Poppe writes. "We are a loyal, dedicated and intensely driven group, and to the extent that we have lost any of our investors' confidence, we are determined to win it back."

Poppe's rise and Goldfarb's retirement aren't the only changes at Ruane, Cunniff & Goldfarb. In his letter to shareholders, Poppe talks of shifting to "a more collaborative approach to constructing the portfolio that will feature a more significant role for [the firm's] senior analysts, including Greg Alexander, Jonathan Brant, Arman Gokgol-Kline, John Harris, Trevor Magyar, Terence Pare, David Poppe, Chase Sheridan and Greg Steinmetz." Goldfarb first joined the fund firm in 1971, after his father met Buffett and said that the younger Goldfarb was looking for a Wall Street job; Buffett pointed him to Ruane's firm, then one year old. The boutique is a value shop whose founders looked up to Buffett, and even held Buffett's Berkshire Hathaway as the fund's top holding for nearly two decades. 

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