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Bolton says fraud risk won't put him off Chinese smaller companies

Anthony Bolton tells shareholders the risk of fraud will not deter him from investing in smaller companies for the Fidelity China Special Situations fund.

Bolton says fraud risk won't put him off Chinese smaller companies

Anthony Bolton has insisted problems with fraud will not deter him from investing in smaller Chinese companies for the Fidelity China Special Situations fund.

Bolton told shareholders at the fund's annual general meeting that one of his biggest holdings in the consumer sector, Gome Electrical Appliances, still had risks which ‘are not completely over.’

He explained the former chairman of Gome, who was jailed last year for bribery and insider trading, was still a big shareholder in the company. Although Bolton said the firm ‘has had its problems’, he said it was attractively valued.

Bolton admitted he knew corporate governance was a ‘big issue’, especially with regards to the purchase of reverse merger companies listed in the US.

He said: ‘With reverse mergers it has been a bigger issue. There we do a lot more third party research, with due diligence experts.’

Bolton added: ‘Why did I not just buy the biggest companies in China? It’s less rewarding. I’ve always gone for smaller and medium companies although there have always been a few disappointments.’

The manager also conceded the performance of the fund in the last nine months has been disappointing. He said: ‘The first half I was pleased with, although I’ve given a lot of it back over the last nine months.’

Shares in the fund, which manages £730 million of assets on behalf of investors, has fallen 14% in the past six months but is down 8% over one year.

The trust also invests in unlisted companies following a purchase on 5 May.

Bolton said: ‘I did say at the outset we would put some money in unlisted securities. This company is in the consumer area, and it is hoping to list in the next 12-18 months. I’m going to watch it as it progresses.’

He said a lot of the drag on performance was due to wider macro issues, including a slowing of Chinese growth, as well as ongoing eurozone troubles and the US debt situation.

4 comments so far. Why not have your say?

Alastair Watt

Jul 30, 2011 at 21:03

After the initial hype and an issue of C shares, I am down more than 23% on my holding of this vastly over-rated trust. All we seem to get are excuses and the impression of experimentation with a little bit here and a little bit there; a bit of a witches brew. Why is it that the First State trust is so much more stable and exudes professionalism? Mr Bolton ought to get a grip of the situation.

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puthukodi jayaram

Jul 31, 2011 at 11:10

i am NOT happy at all with mr Boltons explanation with regard to his Fidelity China Special Situation fund but there is nothing shareholders can do except to close their shares al a loss indeed

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Hopeless romantic

Aug 01, 2011 at 07:50

Last time I looked, ther shares were still at a premium to NAV. In a perverse way, that gap is likely to close or reverse when Bolton finally retires - although handing over to another manager might be what the best thing that can happen to the trust.

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Hopeless romantic

Aug 01, 2011 at 08:10

P.S. I checked - it's possible I was not totally correct about the NAV :)

the share price IS at a discount.

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