By ADRIAN LOWCOCK 02/02/2010
Anthony Bolton is one of the UK’s most experienced fund managers and most successful investors, having managed the Fidelity Special Situations fund from December 1979 until December 2007. During his tenure, the funds achieved annualised growth of 19.5%, turning £1,000 investment into £147,000.
After spending two years mentoring other fund managers, Anthony has decided that the potential in China is irresistible and will move to Hong Kong to manage a new China trust. Undoubtedly, this launch will attract a lot of attention and so we have compiled a brief Q&A for investors. Please note that final details have yet to be published and so this commentary should be seen as our preliminary view.
Why is Anthony Bolton launching a China fund now?
Whilst Anthony Bolton built his reputation as a UK and European investor, he has been a regular visitor to China since 2004. In recent years, he has become increasingly excited by the prospect of managing a portfolio investing in China, because of the growth potential he sees in the region.
What structure will it take?
It will be a closed-ended Investment Company with a finite number of shares issued. This should allow Anthony to take long term views on relatively illiquid stocks. However, it also means that the share price will be determined by supply and demand and so it may be different to the net asset value (the actual value of underlying investments). If the launch is successful and investor applications are scaled back, then the shares may trade at a premium to net assets. However, we recommend that investors look at this fund on a long term view, in which case the share price performance should be similar to the underlying investments.
How will it be invested?
We are still awaiting further details on this. Anthony has typically been a ‘value’ investor – trying to find stocks that are relatively unloved by the market. I had the pleasure of meeting Anthony at a dinner before Christmas and I was able to hear that this fund will be higher risk than the Special Situations fund and will probably invest in some earlier stage companies.
Will Anthony’s lack of China investment experience be a problem?
He has made several trips to the region and already has a good understanding of the markets but inevitably there may be some cultural and regional issues which require longer experience as well as communication difficulties. Fortunately, he will be supported by Fidelity’s large research team based in the area.
Will it be suitable for me?
This will be a relatively high risk fund and movements in the net asset value are likely to be amplified at the share price level by changes in the discount or premium. Therefore, it needs to be considered as part of a diversified portfolio and should not represent more than 5% of the total.
Will I be able to buy it through Bestinvest?
Yes. As usual we will aim to offer market leading terms and these will be announced soon.
Will it be eligible for ISAs?
Yes.
Will it be available in fund supermarkets?
It is expected to be available on FundsNetwork but not on Cofunds.
What is Bestinvest’s view?
Bolton’s Special Situations fund was on our rated fund list from 1990 until he stopped managing it in 2007, so we are very confident in his ability as a stockpicker. We are also bullish about the long term prospects in China, which is why we have a relatively high allocation to the Far East and Emerging Markets in our models. Ordinarily, this should lead to a strong recommendation, but there are three potential snags. As we said above, Bolton lacks specific experience in the region and for that reason this fund may not qualify for a rating based on Bestinvest’s usual criteria. Secondly, there may be signs of a bubble in China. If so, this may not be the optimum time to invest, something that Bolton has acknowledged. However, market timing does not affect the long term view of the potential for China-focused investments. Finally, Anthony will probably be running the fund for only a few years before retiring and that is a shorter time period than we consider to be the minimum for this type of fund.
What alternatives are available?
Anthony Bolton is not the only manager with a strong track record and consistent performance, and indeed he isn’t the only manager investing in China that can deliver long term returns. Martin Lau manages First State Greater China Growth fund and has a strong reputation of investing in the region. For those looking to take a more diversified approach to accessing China, Angus Tulloch’s First State Asia Pacific Leaders funds have consistently performed.
As more information becomes available, we will be posting it on our website to keep you informed.
If you would like to discuss this article further please call one of our Advisers on 020 7189 9999.