Bolton Preparing to Cap Fidelity China Fund Assets amidst Rapid Inflow

December 4th, 2009
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Contributed by: Emerging Manager Focus
Anthony Bolton says he would consider placing a cap on his forthcoming Fidelity China fund if inflows exceed expectations. Speaking to Fund Strategy last week, Bolton said he had a figure in mind for expected inflows into the vehicle, which will come to the market next March.

Asked if there were plans to cap the fund, he said: "There is a maximum amount of money I would like to run, so yes."

Bolton's former fund, Special Situations, now managed by Sanjeev Shah, peaked at pound 5.4 billion in assets before it was split into two separate portfolios in 2006.

Bolton says he intends to apply the management style he used for almost 30 years on Special Situations to the new portfolio.

The main difference between it and Fidelity's existing China products will be its more aggressive approach.

"The key thing is that I am running it in a style I expect to be similar to Special Situations," he says. "Broadly I would expect it to have a higher tracking error."

The biggest allocation Special Situations ever held in Chinese stocks during Bolton's tenure was about 5% over the course of three years. But Bolton is confident his stockpicking skills will transfer into the Chinese market, although he has never run a pure China fund before.

"I started going to China in 2004, and for three years I had Chinese stocks in Special Situations," he says.

"I visited the country twice a year and I have continued to do so. I have seen 40 companies in the last three months.

"Do I have the experience? Not as much as others running a China fund, but I have a lot of experience running money and I think that is what is important.

"Some people say [my style of stockpicking] won't work because you have to do things differently in China. My contention is I don't believe that. That local managers are short-term traders is just because the market is not mature yet."

Another concern for investors is that Bolton has committed to running the fund only for two years. "This is a big step in my life, and I wanted to experience living here first hand," he says. "It would be lovely to say I would do it for 10 years but I can't.

"I was very involved in picking a successor on Special Situations, and I like to think that, touch wood, that has gone well. If it is only two years I would have a view on who [the China fund successor] is going to be after a year or so."

Initial adviser reaction to the launch was mixed, with some worried that Bolton's mainstream appeal will underplay what is still a risky market.

Bestinvest and City Asset Management are recommending alternative China offerings run by First State and Martin Currie.
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