This was the date the Fidelity China Special Situations investment trust launched and marked what could end up being a real turning point for Bolton’s career in fund management.
Prior to this he held a virtually un-blotted copy book because any mistakes he might have made in the past had been wiped clean by his stellar long-term performance.
Perhaps then it is a mark of the short-termist-investor times that his faltering performance at the helm of Fidelity China Special Situations (FCSS) has not been given such leniency.
Reasons behind the ranting
As Kieran Drake, research analyst at Winterflood Investment Trust says, the fund got off to a strong start, outperforming the MSCI China index, but it significantly underperformed the index in 2011.
Since the start of 2012, with an improving performance from markets the fund’s performance has also picked up. This is to be expected since its bias to mid and small-cap stocks means it should underperform in falling markets and outperform in rising markets.
“However, shareholders would have expected better performance from Anthony Bolton, whose long-term performance of investing in the UK is outstanding,” Drake added.
The truth is, Bolton had his off years during the 27 years he spent running the flagship Fidelity Special Situations investment trust, something devotees have chosen to forget or to ignore.
Of these, perhaps the most notable was in the lead up to the tech bubble in the late 90s.
“Bolton is a contrarian investor buying anti-momentum stocks, so in the 1999 period when it was all about tech he was nowhere near it. He is also a value investor and so was not going to want to over pay for stocks just because they are the trendy stocks of the day,” explains Darius McDermott, managing director of Chelsea Financial Services.
After the tech bubble burst Bolton’s star truly started to shine because he had resolutely stayed away from the sector. By this time he had built up a strong long-term track record and it was from 2000 until he stepped down from managing the Special Situations Fund that it attracted huge amounts of assets.
Patience wearing thin
The key difference today is that Bolton has not got an impressive track record in China with which to plead his case and using his UK and European equity investing reputation is starting to wear thin.
Coupled with the greater scrutiny he has been under this time around because of the controversy of his return to active fund management to run FCSS (was it a cynical ploy by Fidelity to acquire assets?) it is not hard to see why investors have less patience for his most recent phase of poor performance.
Having extended his minimum tenure a couple of times, it now runs until at least April 2014 and he has two years to turn FCSS and his reputation back around.
If he manages to improve and maintain above-benchmark performance between now and then he will only have underperformed one out of four years, which for a special situations and an EM fund is not a bad run.
Reputation to salvage
Drake says: “We view the announcement that he has extended his tenure as manager as positive for the fund and for shareholders. It is worth noting that Bolton has a significant following of private investors and the shareholder register for the fund reflects this.
"If his decision had gone the other way, it is possible that these shareholders would have followed him out the door, which would in turn put downward pressure on the fund’s discount.”
But some are not convinced his commitment to stay put will be enough to save his reputation. David Cowell, director at Myddleton Croft, says: “I sometimes wonder why he is still doing it. I think if I were him I would have sat back with a fishing rod a long time ago. There’s no doubt his reputation has been tarnished. The fact that investment seems to have become a much more short term occupation than it used to be one could argue is not a good thing, but it is unfortunately going to stay that way."
One thing to keep in mind is Bolton may never have had the opportunity to do as well as he did, or make as much money for investors as he did on the Special Situations Fund if we had been as quick to judge then as now.
Next D-Day for Bolton: 19 April 2014 – watch this space.
Do you think Bolton has received a rough ride, or is it right he is under such close scrutiny on the Fidelity China Special Situations Fund?