Anthony Bolton’s Fidelity China special sits fund suffers further fall in NAV

Anthony Bolton 450

Fidelity Worldwide Investments fund manager Anthony Bolton has described a “further disappointing period” for investors in his Fidelity China Special Situations investment trust after recording another fall in net asset value in the six months to September 30.

In the trust’s interim statement, Bolton says the six months to 30 September saw net asset value per share drop by 6.2 per cent, underperforming its MSCI China index benchmark, which fell by 2.1 per cent, in comparison – net asset value per share slipped from 84.72p at 31 March to 78.73p per share at 30 September.

The trust’s exposure to bank loans and long contracts for difference as a percentage of net assets increased from 23.8 per cent at the end of March to 26.1 per cent at the end of September.

He says: “The main cause continues to be the combination in a falling market of the company’s gearing and its high exposure to medium and smaller sized companies – the MSCI China Mid Cap index being down 7.3 per cent and the [MSCI China] Small Cap index being down 8.5 per cent.”

However, Bolton says the investment trust and market have both performed better during October.

The star manager says his investment strategy remains unchanged and will continue to hold exposure to smaller companies.

He explains: “Despite their poor relative performance I still believe that the exposure to smaller private companies rather than the larger state owned enterprises will prove to be more rewarding in the longer term.”

Bolton says he has increased exposure to companies operating in the internet space, rebuilding his exposure to Tencent and adding a 2.1 per cent position in Baidu as well as a small position in Sina, he also acquired a 2.6 per cent holding in convertible shares of unlisted company Alibaba Group.

“The use of internet services in China is booming at the same time as internet penetration is increasing and companies like Tencent, Baidu and Alibaba are benefiting from this trend,” he says. “Alibaba Group’s subsidiaries, Taobao and TMall, account for over 75 per cent of all e-commerce spending in China.”

The fund manager adds: “Investors in the company have needed more patience than I initially anticipated but I still believe this patience will be rewarded.

“Additionally, there is the prospect of the new government embarking on an exciting decade of deregulation as well as stimulating private enterprise.”

Bolton has previously admitted to poor performance by the trust with analysts at Winterflood Investment Trusts also voicing concern.