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Bolton keeps faith in Chinese smaller companies despite setbacks

Anthony Bolton, manager of the underperforming Fidelity China Special Situations investment trust, insists Chinese smaller companies will win out in the end.

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by Rachael Revesz on Nov 13, 2012 at 11:22

Bolton keeps faith in Chinese smaller companies despite setbacks

Exposure to smaller companies will pay off in the longer term despite their poor relative performance, said Anthony Bolton, manager of the Fidelity China Special Situations investment trust.

'Despite their poor relative performance I still believe that the exposure to smaller private companies rather than the state-owned large enterprises will prove to be more rewarding in the longer term,' the veteran manager said.

Bolton said his investment strategy remained unchanged, yet he has built up exposure in the internet space. He recently restored his position in Tencent, added a 2.1% position in Baidu, and a smaller position in unlisted company Alibaba Group.

Shares in the investment trust fell 9.5% over the six months to 30 September, and the net asset value (NAV) per share was down 6.2%, according to its half-year results published yestereday.

The investment trust underperformed the MSCI China Index, which was down 2.1% over the period.

The fund has struggled to gain traction since its launch to great fanfare two years ago after Bolton, who made his name running the Fidelity Special Situations fund for many years, came back from retirement.

The shares are currently trading at around 77p, down from their 100p launch price. The NAV per share stood at 78.73p as of 30 September, according to the company.

The fund’s bank loans increased from 23.8% as of 31 March to 26.1% as of 30 September.

The fund has fully drawn down on its £95 million loan from February this year, but continues to use derivatives for further gearing or borrowing, totalling a further £41.8 million.

The fund's largest holdings are Ping An Insurance, Tencent Holdings Limited, a software development company, and China Unicom Limited.

Bolton (pictured) said this quarter has continued to disappoint, with the main cause being the combination of China’s slowdown, the fund’s gearing and its high exposure to medium and smaller sized companies.

‘Encouragingly the markets and the company have performed better in October,’ he said.

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12 comments so far. Why not have your say?

Bolton is a legend, once he has taken the time to appreciate the difference in the way things work in China he will be successful

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Bolton is a legendary 'UK' fund manager. What I fail to understand is why, when equity investing is a long term business, he has only committed to a short time running his China Trust.

He is going to run out of time.

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he has extended his tenure at FCSS until 2014 I thought?

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Yes, only to 2014 and then perhaps further. Equity investors surely need to have at least a 10 - 20 year time horizon. He has over-promised and so far under-delivered!

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No disrespect to A.Bolton and accepting his success in the UK,I would say,in general''Genius is a rising market''.So me managers who did well(in positive)in falling or vicious downturns eg 1987,2009.

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Show me...even...

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What is Anil Kumar on about?

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The only person who has won on this is Bolton. The fees he has earned from this fund are enormous.

I have lost a lot of money in his fund. He has not got anything right before, his performance is below market average, is he suddenly a font of wisdom?

if it looks like a duck, smells like a duck, performs like a duck, it probably is a duck.....

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He pushed his luck too far. He should have quitted while he as ahead. Gamblers always make the same mistake.

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Gearing works both ways and his reputation is being progressively destroyed by this unfolding disaster.Mind you I am surprised the discounts not opened out more,which would really put the cat among the pigeons.Another 6 months to prove?

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I'm not an investor in his fund but am resident in HK and travel often in China. I am confident that he is on the right track. When the Chinese market starts to pick up again, stocks will rocket. Have patience.

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druceym

Nov 14, 2012 at 10:11

This is the only Fund Investment in my portfolio ( about 5% ) and by far the biggest loss maker - plus the insult of 'fees' for continued mismanagement -

I rue the day I fell for the hype. And of course when he runs for the hills in 2014

the continued disastrous results will be down to \ special temporary factors '.

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