Fidelity’s Anthony Bolton to Stop Managing China Fund and return to retirement after it failed to match the returns of the U.K. trust that made his reputation

Fidelity’s Anthony Bolton to Stop Managing China Fund

Anthony Bolton will give up managing the Fidelity China Special Situations fund and return to retirement after it failed to match the returns of the U.K. trust that made his reputation.

Bolton, 63, will be succeeded by Dale Nicholls, manager of Fidelity’s Pacific Fund since 2003, Fidelity said in a statement today. The handover will be completed in April 2014, almost four years after China Special Situations became the nation’s largest equity fund to be listed on the London Stock Exchange.

Over 28 years running the U.K.-focused Fidelity Special Situations fund, Bolton delivered average annual returns of 19.5 percent, transforming a 10,000 pound ($15,720) investment in 1979 into 1.49 million pounds in 2007, according to Morningstar Inc. After coming out of retirement to start China Special Situations in April 2010, the fund has lost about 15 percent, matching the MSCI China Index’s decline in British pound terms.“Anthony has had a fantastic career, he is rightly regarded as one of the best active managers of recent decades,” said Mark Dampier, a funds analyst at Hargreaves Lansdown Plc in Bristol, England. “His China fund’s performance in recent years has tarnished this record slightly.”

Shares in Bolton’s China trust, which has 552 million pounds of assets, closed at a record 11 percent discount to its net asset value on June 12, compared with a 13 percent premium in October 2010, according to data compiled by Bloomberg. The fund plunged 38 percent in 2011, while the MSCI China fell 20 percent in pound terms.

China Slide

The Shanghai Composite Index (SHCOMP) has slumped 34 percent since the start of 2010 as China’s central bank raised interest rates and banks’ reserve ratios to curb inflation. The benchmark gauge has declined 5 percent this year amid signs the nation’s economic growth is faltering. Industrial production rose a less-than-forecast 9.2 percent in May from a year earlier and export growth was at a 10-month low, National Bureau of Statistics data showed on June 9.

Bolton forged a reputation as a contrarian investor who specialized in finding undervalued European stocks. British newspapers dubbed him the “quiet assassin” after he led a 2003 revolt by minority shareholders to block the appointment of Michael Green as chairman of ITV Plc. He joined with several shareholders in demanding that ITV appoint an outsider as chairman following a 4 billion-pound merger deal that combined the U.K.’s two biggest commercial television broadcasters.

Split Fund

Nicholls will assume full responsibility for China Special Situations on April 1, 2014, Fidelity said. When Bolton announced his first retirement from money management in 2006, his fund was split between its U.K. and global assets and he stayed on for a yearlong hand-over period for the two managers who succeeded him.

“As part of an orderly handover of the portfolio, Anthony and Dale will work together and discuss portfolio ideas regularly,” Fidelity said in the statement. “Like Anthony, Dale is a bottom-up stock picker with a growth bias and a significant tilt towards smaller and mid-cap companies.”

Fidelity China Special Situations (FCSS) has climbed 2.1 percent this year, while the MSCI China fell 8.4 percent in pound terms, data compile by Bloomberg show. Shares in the China fund rose 0.3 percent to 86.15 pence at 2:45 p.m. in London today. The MSCI China index gained 0.9 percent today.

“The fund’s performance this year has been markedly better than the first two years,” said Jackie Beard, the London-based director of closed-end fund research at Morningstar Inc., which placed its rating on Bolton’s fund under review today. “We see no reason for existing investors to panic as this is merely confirmation of what we knew was on the horizon. We will be assessing Nicholls’ track record and management ahead of meeting him in July.”

To contact the reporters on this story: Darren Boey in Hong Kong at dboey@bloomberg.net; Alexis Xydias in London at axydias@bloomberg.net

June 17, 2013 9:57 pm

Short view: Bolton hit his limit

By James Mackintosh

Star fund manager failed to crack China

“The difference between genius and stupidity is that genius has its limits,” according to a quip widely mis-attributed to Albert Einstein. The great physicist may not have said it but, for Anthony Bolton, it probably rings true: the star Fidelity fund manager hit his limit with the China fund he has run for the past three years.

Mr Bolton is now retiring, but it is worth looking back at his particular brand of genius for what it says about much of the fund management industry.

Mr Bolton made his name running the UK Special Situations fund for 28 years, during which time it turned £100 into £15,220 and made him one of Britain’s best-known fund managers.

He beat the market by an average of 6 percentage points a year. No wonder investors piled into his China fund when he came out of retirement in 2010 – only to lose 13 per cent overall since then.

He has always been coy about how he beat the UK market, but a big part of the story was that he took more risk. Investors secured a stunning long-term return, as long as they were willing to put up with painful setbacks.

In 1998, for example, he lost a quarter of their money in four months, against a 15 per cent fall for the wider market. In 1990, he lost 29 per cent when the market was down 11.

Most of the time, the trade-off was worth it. It was also hard for others to copy.

Not any more. Mr Bolton’s performance turns out to closely match that to be had from exploiting two of the leading stock market anomalies, according to data from Elroy Dimson, Paul Marsh and Mike Staunton of London Business School. Small companies and value stocks tend to beat the market, with more risk.

This is not to denigrate Mr Bolton. He identified the opportunity early and exploited it to the full, and investors in his UK fund should be grateful for that genius. The same approach will probably work in China – but, as Mr Bolton has shown us, investors must be ready to put up with long periods of poor performance.