Duelling Fools: Bolton's China Fund

Stuart Watson

By

Stuart Watson

Published in Investing on 5 March 2010

Two Fools discuss the prospects for the Fidelity China Special Situations fund.

One of the UK's most successful fund managers, Anthony Bolton, is returning to fund management with a new investment trust called Fidelity China Special Situations (LSE: FCSS). 

Fidelity is hoping to raise a mammoth £650m, but is now a good time to invest in a China fund?

 

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Comments

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imacifm 05 Mar 2010 , 12:00pm

A possible stagging opportunity, that's all. All that money is going to push up the price of Chinese stocks - maybe better to invest in funds that already have them?

leapo 05 Mar 2010 , 12:03pm

I will keep it brief and to the point. The Management fees are too large, China's good news is largely factored in already and Mr Bolton appears to be in a win win situation with the prospect of being paid a bonus for actually just doing what he already being paid for. One to avoid in my estimation

Basia02 05 Mar 2010 , 12:22pm

Past experience has shown me that Investment Trusts usually trade at a discount. Add in the launch and commission costs, and you are lucky if a new fund shows anything less than a 10% loss straight away.

Nemo666 05 Mar 2010 , 1:36pm

What does Anthony Bton know about China? I spent 4 years in Asia and worked closely with many businesses dealing with china. It is a shark pool. The stock Market in china is two hundred years behind the west in terms of openess and investor protection. Auditors are easily bought in china and se Asia. So you can't rely on financials as they are usually make belief. And that includes the big boys. Asian business values are just totally different and it is all about large family based business empires. We are gwilos. The foreign devils. We will always get shafted. So although china is a growth story long term the real issue is how to tap into that? This fund isn't the answer!

DennyWhite 05 Mar 2010 , 2:00pm

So the answer to BasiaO2 is to wait for he 10% drop and then buy into the fund. I shall be watching this one with interest.

DennyWhite 05 Mar 2010 , 2:00pm

So the answer to BasiaO2 is to wait for he 10% drop and then buy into the fund. I shall be watching this one with interest.

Jezzer10 05 Mar 2010 , 2:16pm

Investment trusts are subject to the laws of supply and demand just like any other equity. With the level of marketing being put into this fund, I suspect it will trade at a premium, not a discount, so there is a good chance of an instant profit. Also, for those nay-sayers who think that growth is already priced into the Chinese market, remember the name of this fund: "Special Situations". It's not a tracker. I'm in. This is a great long-term story.

Jezzer10 05 Mar 2010 , 2:19pm

Oh and don't forget that the Chinese will have to revalue their currency - upwards - in the not-too-distant future. That will also provide an instant uptick to the price of this trust.

The key worry in my mind in the long term (and one that no-one seems to be talking about) is political risk, as China becomes more wealthy and does more sabre-rattling...

aGreyarea 05 Mar 2010 , 2:41pm

I'll happily admit my lack of understanding, and in educating myself, regular reading of this site has helped no end, many thanks!

I got an invite for this but didn't completely understand. It looked like i'd be buying shares in an investment company and hoping for the value of it's assets to go up, as well as a bit of Yuan appreciation, thereby improving on the subscription price.

Is this right?

I have an understanding of sharedealing but no experience of investment trusts, so after reading both articles mentioning annual fees and performance bonuses, I'm not sure what this is.

wondrinfree 05 Mar 2010 , 3:05pm

Forgive my ignorance on this matter but why are there no index trackers for the chinese stock market? Surely that would be the best way to increase one's exposure to china.

XMFPhila100 05 Mar 2010 , 3:18pm

Time will be the ultimate judge, of course, but all the new China-related fund launches remind me of mass release of technology-focused funds launched in the late '90s.

As this Street.com (a US site) from 2000 noted (http://www.thestreet.com/funds/fundjunkie/1137600.html), "Just about every time a slew of fund launch in a given sector, it trails the market the next year, sometimes getting thrashed soundly."

Perhaps I'm just being cynical, but since asset managers earn their keep charging a percentage of assets, they're incentivized to accumulate as many assets as possible, so they have to strike while the iron is hot. For instance, you'd have a hard time accumulating assets by launching a bank-focused fund today, even though that's probably where some of the best long-term values reside.

Stay patient. Stay focused. Stay Foolish.

Todd Wenning
US Fool

Battersbyda 05 Mar 2010 , 6:26pm

Better value elsewhere

XMFPhila100 05 Mar 2010 , 6:34pm

Perhaps this link will work for the Street.com reference: http://tinyurl.com/y8j4ha2

Todd Wenning
US Fool

jerryrc 05 Mar 2010 , 10:11pm

My grandmother recounted to me only a few days ago how, when she was young, everyone without exception estimated China as being an imminent economic super-power ahead of the US. She is 94 now and it still isn't by a long shot.

merlin492 06 Mar 2010 , 10:45am

Bolton didn't often disappoint on Fidelity Special Situations and also on his European funds. He always credited Fidelity's analysts for much of his returns - so they as much as him are what will drive this new fund. I'm in - easy choice for my ISA this year.

propolis 09 Mar 2010 , 9:31am

Didn't Winston Churchill say .... beware of the Chinese" ? I think I will heed the great man's words and watch from the sideline.

Samadd 12 Mar 2010 , 8:29am

The likely reason for no index trackers in china is that China restricts foreign investment. You have to be registered and your investing has a limit set on it.

Samadd 12 Mar 2010 , 8:44am

I believe the Yuan will revalue upwards. China has been fighting to avoid this for years now. I don,t believe that £650M will appreciably push chinese shares higher - there are a lot of companies in China. It's economy is in the world top three. Would you say £650M would affect the FTSE to any extent?

At the moment I have no exposure to China. It is too late for those gains already recorded so needs stockpicking skills to join in now. Yes there is a risk that Bolton is past his sell by date, the fees are not cheap and the shares in the trust may be illiquid. I will be taking a small position but not putting my shirt on this.

worthabob 22 Mar 2010 , 12:52pm

What ever happens it will be a nice little earner for Mr Bolton.
And if it fails it will be someone elses fault.

AleisterCrowley 09 Apr 2010 , 1:19pm

It's a great opportunity for someone to make a lot of money.

That 'someone' being Anthony Bolton of course...

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