For the six months ended 30 September 2013, the investment trust produced a net asset value (NAV) return of 10.9% compared with the MSCI China index’s loss of 1.9%. Since its launch in 2010, the fund’s NAV is now up by 10.1%, while the benchmark is down by 0.6%. Although its share price remained 1% below the flotation price at the end of September, it has since moved 0.6% above that level.
Fidelity is entitled to a 15% performance fee if the trust beats the index on an NAV basis through its financial year, subject to a 2% hurdle rate and making up any underperformance that has been carried forward from previous years.
Bolton’s successes through the first half of this year mean he has now accrued such a bonus, potentially worth £1.1 million – equivalent to 0.2% of NAV – payable if the trust remains sufficiently ahead of its benchmark until the end of March.
This would coincide with Bolton (pictured) handing the fund’s management over to Citywire A-rated Dale Nicholls on 1 April 2014 following his retirement. The fund had not been eligible for a performance fee in any prior year.
Bolton attributed his impressive latest results to his decision last year to boost his exposure to both Chinese internet companies and US-listed Chinese companies. ‘I am delighted that this has paid off,’ he said.
The manager also noted the turnaround in the fortunes of the smaller Chinese companies he has backed. ‘It is good to see the factors that hindered performance in the past, the exposure to smaller private companies and the portfolio’s borrowings, are now working to shareholders’ advantage,’ he said.
Bolton furthermore tipped these small caps to drive the trust’s performance in the future. ‘I am strongly of the view that simply buying exposure to the index in China will not be as rewarding as buying an actively managed fund with an emphasis on the generally smaller privately run companies that I believe will lead China’s growth over the next few years,’ he explained.
‘The index itself is weighed down by many large state-owned enterprises where policy support is likely to be less favourable than in the past. I expect a number of them will face headwinds as cheap finance is cut off, as the government opens up selected industries to competition and as some businesses suffer from the ongoing anti-corruption campaign.’