Exit the Dragon: European star Anthony Bolton's shaky time in China

Anthony Bolton drew unprecedented investment to his China fund. Now, as he steps aside, Julian Knight asks if, and why, he failed

As far as fund managers are concerned they don't come much bigger than Anthony Bolton. His mere presence heading up the Fidelity China Special Situations fund managed to tempt private investors to plough in an unprecedented £460m of hard-earned cash at launch, followed by £166m a year later.

At the time of the fund's launch in 2010, during the depths of the global financial crisis, the huge appeal of Mr Bolton was seen as a vote of confidence in his skills and the prospects for China, and perhaps a triumph of fund management marketing departments.

Many observers poured cold water on the Fidelity offering, questioning the fees structure and whether or not Mr Bolton, who had precious little experience in the Far East, could produce the same returns as he had done for years in the UK and Europe. But nevertheless, investor cash just kept on pouring in.

To date, these investors have not been well served. Though he was working in what Patrick Connolly from Chase de Vere brands "one of the worst-performing sectors over the past three years" – China – Mr Bolton's fund has even underperformed that benchmark.

In total, the fund is down by 13 per cent since launch (effectively down much more when inflation is factored in), against an average growth of 8.45 per cent across the sector.

"Continued talk of a slowdown in the Chinese economy, alongside global economic issues and negative investor sentiment have proved an ongoing drag on stock-market performance," Mr Connolly added.

Now Mr Bolton – age 63 – is going into retirement, to be succeeded by Dale Nicholls, who has a crucial 17 years of experience of Asian markets.

He will have his work cut out turning around the massive Fidelity fund.

"Chinese companies are culturally very different in terms of how they work, the way they manage relationships and their levels of corporate governance, meaning you can't always believe what they say or what is in their accounts," Mr Connolly said.

With these warning words in mind, it's difficult to see how Mr Bolton could have bucked the general market torpor in China, particularly as his style of management is based on getting under the skin of a company and its management, which in itself requires full disclosure and relies on cultural similarity.

"For one thing, he didn't speak the language, and while the same was true in Europe, the nuances, body language and culture of the Chinese are a lot different, and a lot can be lost in translation, which is an important consideration when you are meeting management and trying to gauge if they are fit for investment. It won't have helped his gut feel and instinct which has been so invaluable to his performance in the past," Darius McDermott, the managing director of Chelsea Financial Services, said.

But what should investors in the Fidelity fund, and more widely China, be doing now, considering the underperformance of the sector?

Mr Bolton himself has promised to do his "damnedest" to get returns in his remaining nine months in charge of the fund.

He added that he did not regret his Chinese sojourn: "I remain a great bull on China and hope that over the next nine months some of that might be rewarded," he said.

Mr McDermott reckons that, in a poor market, the Fidelity fund was also set for a bit of a fall: "The trust does have a small and mid-cap bias and has gearing, so it was always going to underperform in falling markets against a much wider benchmark."

Nevertheless, the Fidelity has drawn closer to the pack of late and Mr McDermott reminds investors with money in the Fidelity fund: that "the handover is going to be over quite a few months".

"In the past, when Mr Bolton has stepped away from funds, he has managed the transition well and the new managers have normally had a good 12 months on taking the reins. I therefore see no reason for investors to panic.

"We will rate the trust a 'hold' for existing investors until we have met the manager and had the opportunity to assess whether we think he will be a good pair of hands for the longer term."

However, for new investors who are interested in China, Mr McDermott says that they should try to gain access to the world's second-biggest economy through a general emerging-market fund rather than a country-specific one.

"Most investors will be better off investing in a generalist EM fund as it will be less volatile less risky," he says. "If investors are keen to invest in China then the fund I like is the Invesco Perpetual Hong Kong & China fund."

For some, though, it is far too early to gauge whether Mr Bolton has been a failure in China, and funds invested in the country are a very long-term investment play, according to Brian Dennehy of Dennehy, Weller and Co, who added: "I believe his approach will ultimately work well, but that will only become clear some time after he has returned to the UK.

"China is going through a transition which will appear painful on an economy-wide level but, counter-intuitively, there will be growing opportunities at a company level, exploitable through a fund focused on under-researched small and mid-caps."

Mr Dennehy suggests investors in China should look at drip-feeding their money into the sector rather than risking everything with large lump-sum investing which relies on getting the timing correct.

"Investing monthly in China is ideal, and this Fidelity fund would certainly be recommended for that purpose," Mr Dennehy says.

And long-term, the Chinese economic story is still an extremely appealing one.

"In China, growth is slowing but the economy is rebalancing – 6-7 per cent annual GDP growth is still very healthy and valuations are near to historic lows, which presents opportunity," Tim Cockerill, head of collectives research at IFA firm Rowan Dartington says.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Voices
The male menopause: those affected can suffer hot flushes, night sweats, joint pain, low libido, depression and an increase in body fat, among other symptoms
voicesSo the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
Arts and Entertainment
Anna Smaill’s debut novel, The Chimes, is a fusion of fantasy and romance
booksMan Booker Prize nominee Anna Smaill on the rise of Kiwi lit
Sport
Ji So-Yun scores the only goal of the game
sport
Arts and Entertainment
One of the Pyongyang posters, the slogan of which reads: ‘Let the exploits of the northern railway conductors shine!’
art
Life and Style
Linguine with mussels and fresh tomatoes
food + drink
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: DBA Developer - SQL Server

    £30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Customer Service Administrator

    £13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...

    Recruitment Genius: Dialler Administrator

    £22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...

    Ashdown Group: Contracts Manager - City of London

    £35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...

    Day In a Page

    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Bill Granger recipes: Heading off on holiday? Try out our chef's seaside-inspired dishes...

    Bill Granger's seaside-inspired recipes

    These dishes are so easy to make, our chef is almost embarrassed to call them recipes
    Blairites be warned, this could be the moment Labour turns into Syriza

    Andrew Grice: Inside Westminster

    Blairites be warned, this could be the moment Labour turns into Syriza
    HMS Victory: The mystery of Britain's worst naval disaster is finally solved - 271 years later

    The mystery of Britain's worst naval disaster is finally solved - 271 years later

    Exclusive: David Keys reveals the research that finally explains why HMS Victory went down with the loss of 1,100 lives
    Survivors of the Nagasaki atomic bomb attack: Japan must not abandon its post-war pacifism

    'I saw people so injured you couldn't tell if they were dead or alive'

    Nagasaki survivors on why Japan must not abandon its post-war pacifism
    Jon Stewart: The voice of Democrats who felt Obama had failed to deliver on his 'Yes We Can' slogan, and the voter he tried hardest to keep onside

    The voter Obama tried hardest to keep onside

    Outgoing The Daily Show host, Jon Stewart, became the voice of Democrats who felt the President had failed to deliver on his ‘Yes We Can’ slogan. Tim Walker charts the ups and downs of their 10-year relationship on screen
    RuPaul interview: The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head

    RuPaul interview

    The drag star on being inspired by Bowie, never fitting in, and saying the first thing that comes into your head
    Secrets of comedy couples: What's it like when both you and your partner are stand-ups?

    Secrets of comedy couples

    What's it like when both you and your partner are stand-ups?
    Satya Nadella: As Windows 10 is launched can he return Microsoft to its former glory?

    Satya Nadella: The man to clean up for Windows?

    While Microsoft's founders spend their billions, the once-invincible tech company's new boss is trying to save it
    The best swimwear for men: From trunks to shorts, make a splash this summer

    The best swimwear for men

    From trunks to shorts, make a splash this summer