Last updated: June 17, 2013 6:28 pm

Bolton retires after failing to crack China

Anthony Bolton©FT

Anthony Bolton, one of the UK’s best-known and most successful fund managers, is to retire from running the Fidelity China Special Situations investment trust, admitting it had proved more difficult to make money from China than he had anticipated.

Mr Bolton came out of semi-retirement – at his request – in 2010 to set up and run the China-focused fund. He had made his name running the UK-focused Fidelity Special Situations fund, which enjoyed a compound annual rate of return of 19.5 per cent during his 28 years at the helm.

The China fund has not done so well. He soon discovered that several of the 100 or so companies in which he had invested suffered from serious corporate governance problems. At a low point last year he likened his experience of investing in US-listed Chinese stocks to “looking for gold in a minefield”.

Although performance has improved recently, shares in the fund are still below their 2010 launch price and trade at a 10 per cent discount to the value of its assets.

His failure to repeat his UK performance showed how difficult it was to make money in China – especially for a foreigner who does not speak Chinese – analysts said. “The challenge is one we see across a lot of countries, and not just emerging markets. You need to separate the macro story from the micro one. The correlation between fantastic GDP growth and stock market returns is weak at best,” said Anne Richards, chief investment officer at Aberdeen Asset Management.

“Obviously Anthony’s got a fantastic track record over a long period of time . . . but it’s a different market with different dynamics. The corporate playing field is not the same.”

Mr Bolton’s replacement at the China fund will be an existing Asia-based manager, Dale Nicholls, who already runs a pan-Asian fund for Fidelity. Some advisers wonder if the transfer of the high-profile fund to a manager who is relatively unknown in the UK heralds the beginning of the end for the notion of star fund managers.

“Ian Spreadbury is arguably the only star manager in the Fidelity stable now, but then the industry is moving away from the whole idea of star managers,” said Patrick Connolly of UK-based advisers Chase de Vere, citing the problems encountered by Gartmore, another UK fund manager, when star manager Roger Guy departed.

However, others are not convinced, noting that Old Mutual recently lured Richard Buxton from rival Schroders to manage its UK equity funds, and pointing out that Neil Woodford, Mr Bolton’s successor as the UK’s most vaunted manager, was made a CBE in the most recent honours list.

The company stressed there would be no big changes of strategy and that Mr Bolton’s preference for small and mid-cap companies – a major factor in the fund’s underperformance – would remain.

“On paper, Nicholls has a strong track record and good amount of experience in the region,” said Darius McDermott of fund research group Chelsea Financial Services. “The one surprise is that a manager with experience running a pure Chinese equity mandate wasn’t chosen.”

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