Boltons biggest challenge to end career on a high

Today is the third anniversary of the launch of Anthony Bolton's Fidelity China Special Situations, but has it been a career risk worth taking?

Boltons biggest challenge to end career on a high


After initially making a commitment for two years, Bolton has since signed on until at least April 2014, giving him at least a year to turnaround a fund which, let’s be honest, has failed to live up to his incredibly high standards.

On a price basis, the trust is down 13% since inception versus a -1% total return performance from its benchmark MSCI China, according to FE Analytics.

The Asia Pacific Country Specialists sector is down 12% on a total return basis while the open-ended universe, the China/Great China sector, has given an essentially flat return over the past three years.true

“The three years I have been running the fund, particularly in 2011 and the first part of 2012, was quite tough and particularly the area I am invested in, medium and small-sized stocks, did worse than the market and then the gearing on the fund acted to accentuate that,” said Bolton.

“The good thing is that with the market recovering, those factors that have hindered me before have been starting to work in my favour.”

Consistent focus

Bolton has asserted that the basic strategy on the fund has remained consistent with a focus on consumer and services industries and China’s domestic economy, though changes have been made, including an increased exposure to internet companies.

He added: “We have still got pretty attractive valuations; they are a bit off the low but they are down at their low end of the range over the past 10 years. There is money starting to come back and, domestically, there is still a lot of money on the sidelines that could drive the A-share market. All those things together make me quite optimistic.”

Optimistic or not, many of the commentators who paid glowing tributes to Bolton at the end of his reign on Fidelity Special Situations have been less generous this time around, particularly given the trust’s management fee.

This was recently cut from 1.5% to 1.2% – a sign of desperation? Maybe not. Let’s not forget Bolton’s reputation as a conviction manager, and those looking back on his 28 years in the UK with rose-tinted glasses forget that he often went through periods of underperformance before long-term investors were rewarded.

As the end of yesterday, the trust was trading at around 87p per share, on discount of 6.5% – in the past 12 months it has oscillated from being on a discount of 7.2% to a premium of 4.4%.

Tim Cockerill, head of collectives research at Rowan Dartington, bought in at 78p at the end of last year.

Putting things in context

He said: “I think investors need to look at the trust in the context of the Chinese market and other China funds. JPMorgan Chinese fell equally as sharply for a good period of that time when Bolton’s fund went from its peak to a low point. Because the JPMorgan fund is more broadly based, it has recovered better. It’s certainly not a case that China is a great place to be and Bolton has made a mess of it.

“I think for somebody like him who is doing this because he wants to do it, and has got a brilliant reputation, he wouldn’t want to go out on a low point. I wouldn’t be surprised if he were there until it recovered and made original investors money.”

The feeling remains that Bolton wants to stick this through and uphold his stellar reputation. Whether it takes him another year, another three years or longer is the gamble for his investors.