TQ Invest: Fidelity China Special Situations Plc
Nigel Walker, Head of Research at TQ Invest comments on Fidelity China Special Situations Plc: "The return to fund management of Anthony Bolton, possibly the best known of all UK fund managers, was always likely to generate a significant amount of interest.
"He had an outstanding track record at Fidelity, most notably for managing Fidelity Special Situations from December 1979 to December 2007, consequently this has ensured that many investors who have had the benefit of the superior returns which he generated, will have a real soft spot for him and may consider entrusting money to him once again.
"Some investors may wonder why a manager best known for investing in the UK and Europe, would have the capability and knowledge to make a success of such a specialist fund. However, when managing the Fidelity Special Situations fund, he gained experience of investing in Chinese equities, so this is not the unchartered territory which it might at first seem. His first trip to China was in fact back in 2004, that trip and subsequent ones have ignited his interest in the area and he has become increasingly aware that this is where major growth potential lies. This has culminated in the launch of this new trust, which will have to jostle for position with a number of very well established similar funds.
"Before considering the mechanics of the trust in more detail, the rationale for investing in China according to Anthony Bolton is worth being aware of. One of the main reasons he is so positive is that as at the end of December 2009 China represented around a mere 2% of the global equity capitalisation, which is in stark contrast to its heavyweight economic presence.
"The funds he was best known for managing in the past were unit trusts, so it is notable that this will be a different investment vehicle, an investment trust. The most important point to be aware of is that it will make it a more volatile investment, as supply and demand dictates the share price. Fidelity gave considerable thought over the type of investment vehicle this should be, eventually deciding that this route provides the manager with more flexibility.
"This extra volatility combined with the inherent volatility of Hong Kong and China listed companies, means that from a risk point of view this is about as high as you can get. So any potential investor will need to fully bear those points in mind. In addition, on top of the 1.5% annual management charge, a performance fee may also apply, should certain criteria be met."