Fidelity manager Anthony Bolton says that although “disappointed” in the results of his approach to China on his Fidelity China Special Situations trust, both he and his successor Dale Nicholls continue to find opportunities in China’s changing economy.
The news follows the announcement of Bolton’s planned retirement from the trust in April 2014, when he will he replaced by fellow Fidelity fund manager Nicholls.
Bolton (pictured) previously indicated to shareholders last year that he would extend his tenure on the trust until April 2014.
Both Bolton and Nicholls are now looking to reassure investors by highlighting similarities in their investment approach and future opportunities in China, despite the trust’s poor performance against a backdrop of slowing growth in the region.
Bolton says: “There is a significant overlap in our styles and the type of holdings that we have. Nicholls’ shares my enthusiasm for smaller companies, something I have always had, and also for private companies.”
Nicholls has 17 years’ investment experience and has managed the Fidelity Funds Pacific fund since September 2003.
Nicholls also notes that both he and Bolton share a bottom-up approach and tend to “move in the same direction” in sector allocation, currently sharing 33 common names across their separate portfolios.
But Bolton expresses his frustration that his bull approach to the Chinese market has not paid off, as a result of the slowing in the Chinese economy.
He says: “Obviously I am disappointed with the performance so far since inception. It is tougher in the sense that I have had a bull market approach in a market that since inception has been down 6.5 per cent.”
However Bolton stresses that his stepping down “does note relate to the background of the Chinese economy” and that he remains positive about the investment outlook for China.
He says: “I still remain very optimistic about the future, and particularly I think the outlook for private companies in China is much better than the state owned enterprises, with the political environment favouring them.”
Nicholls goes onto add that in China “this fear surrounding slowing growth is creating opportunities for individual companies”.
Bolton and Nicholls agree that the “most intensive” part of the transition will be aligning the portfolio during the first quarter of 2014, with Bolton adding that at this stage he will not buy any new holdings without Nicholls’ agreement.
Both managers also say that following this period, it is unlikely that there will be for a “wholesale change in the strategy” once Nicholls takes over the portfolio.