Mark Dampier: Fidelity keeps faith with China after the Bolton bounce-back

The Analyst

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

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

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

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    Day In a Page

    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones