Mark Dampier: Fidelity keeps faith with China after the Bolton bounce-back
Friday 29 November 2013
Fidelity China Special Situations launched in April 2010 with considerable fanfare. Combining legendary investor Anthony Bolton with one of the world's fastest-growing economies seemed to many a surefire recipe for success. Initially the fund performed well, rising about 25 per cent. Unfortunately this was not sustained. The fund's share price fell to around 70p at its lowest point, from a launch price of 100p.
Mr Bolton readily admitted some mistakes were made along the way. The fund's falls need to be put in context, though. They came at a time when the Chinese stock market as a whole was performing poorly, while gearing of about 20 per cent exacerbated the fund's falls.
This highlights an important point with a single-country fund, or any that focuses on a narrow or specialist area. There are few places for the fund manager to hide. That said, the ensuing media outcry from some quarters was not helpful. As one personal finance editor said to me recently: "Investors expected instant results because of who Anthony Bolton] was and the media was just dying to do that very British thing of taking someone successful down a peg or two." I thought he summed it up well. Newspapers have a huge responsibility to their readers, and based on their comments far too many people sold the fund at around 70p to 80p.
A more considered view should have been taken. During Anthony Bolton's 26-year career running UK money he had a number of poor years. I recall a particularly disappointing period of about four years in the 1990s, but the point is he made it back in droves. It could be argued that he was only ever going to have a limited time to perform, given he initially committed to manage the fund for only two years. Patience is a genuine virtue in investment, though, and sometimes the long-term story gets overshadowed by a short-term need to fill column inches.
The good news is that over the past year the fund has performed strongly, and the price has risen over the issue price to around 105p at the time of writing. This is not necessarily a great return for those who committed at launch, but the rebound is encouraging.
Of course, Mr Bolton is to step down on 31 March 2014, but I have high hopes for Dale Nicholls, his successor. The approach taken by the two managers is not dissimilar and in his current portfolios Mr Nicholls owns many of the same companies. They are both essentially trying to buy tomorrow's winners today. This means they are avoiding the old state-owned enterprises in favour of more innovative privately-owned businesses.
One of the top holdings in Fidelity China Special Situations is Tencent, the internet, media and entertainment services company. It is a $100bn (£61bn) Chinese e-commerce success story that can rival the very best of what the Americans offer. When I visited the company on a recent research trip to Shenzen with Mr Bolton there was a huge TV screen in the office that plotted all the internet users in China on a map. I watched for a moment, noting there were 145 million internet users online. By the time we left it was more than 150 million.
On the trip Mr Bolton also expressed delight at recent Chinese reforms. Lack of space prevents me going into detail, but they included an attempt to level the playing field between state-owned enterprises and private firms; deregulation of interest rates; reforming land rights; open tenders for government contracts; and starting up businesses without state permission. He remains concerned that over the long term greater political freedom will be needed, which a totalitarian state has a real problem with.
Chinese stocks still look good value and the trust is currently on an 8 per cent discount to NAV, with a buyback having limited this to about 10 per cent to date. One thing I would change with the fund is the performance fee. I don't feel it aligns the interests of investors with the fund manager. It would be good to see the board of Fidelity China Special Situations remove this element of the fee.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit hl.co.uk/independent
Customers paying up to £250 more on energy bills than they should every year
10 tips for taking out a personal loan
Has your Premium Bond won the £1million jackpot?
There are 'dark corners' of the investment and pensions industry, says Pension Minister
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
- 1 What happens to your body when you give up sugar?
- 2 Ed Miliband deemed less influential than One Direction's Louis Tomlinson by official Doncaster power list
- 3 Japanese island overrun with cats after population explodes
- 4 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Ukip would cut billions from Scottish budget to fund English tax cuts
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...
£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads