An alternative to Bolton’s Fidelity China Trust
The JP Morgan Chinese investment trust has outperformed its rival with lower volatility.
By Mark Smith, Senior reporter
Friday August 03, 2012
Investors looking for access to the China growth story should consider the JP Morgan Chinese
trust rather than Anthony Bolton’s disappointing Fidelity China Special Situations
portfolio, according to Winterflood’s Simon Elliott.
) is arguably the UK’s best known investor. Famed for turning a £1,000 investment into £147,000 in the 28 years he managed the Fidelity Special Situations fund, the manager came out of retirement in 2010 to test his skills in an exciting emerging market.
However, in just over two years at the helm of the Fidelity China Special Situations investment trust, the manager has not lived up to expectations.
Our data shows that the closed-ended fund has lost 26.49 per cent since launch while the MSCI China index is down just 9.3 per cent.
Performance of investment trust versus index since launch
Source: FE Analytics
“Although we would expect the fund to perform strongly in a bull market, due to its gearing and mid/small cap bias, we would question its suitability for the retail investors that make up the bulk of its shareholder base,” said Winterflood’s head of research Simon Elliott.
“For retail investors looking for exposure to China, we believe that there are more suitable, mainstream products available, such as JPM Chinese, a greater China fund trading on a 12 per cent discount.”
The JPM investment trust has significantly outperformed Fidelity’s offering in the time that Bolton has been in charge, losing just 9.67 per cent.
Winterflood analyst James Brown says that this is due to the fund concentrating on a much less volatile segment of the market.
“JP Morgan Chinese invests in greater China so it is free to invest in Hong Kong as well,” he said. “It’s a well managed portfolio with a different style to Bolton’s trust. It’s not quite as exposed to mid and small cap companies and doesn’t have the same level of gearing.”
A recent Winterflood research note criticised Bolton’s investment approach.
“Only half of the portfolio is covered by Fidelity's main group of analysts with the remainder covered by a single, dedicated small cap analyst,” it said. “With sell side research limited, we believe that this could explain some of the stock specific difficulties that Anthony Bolton has encountered.”
In defence of his underperformance, Bolton said that the fund is benchmarked to the predominantly large-cap MSCI China, while his portfolio is exposed to far racier mid and small cap stocks.
Our data showed that the closed-ended fund has outperformed both the MSCI Mid Cap and Small Cap indices.
The JPM trust is co-managed by Howard Wang, Emerson Yip, Shumin Huang and William Tong and it lists large-caps such as Taiwan Semiconductor, China Mobile and China Construction Bank in its top-10 holdings.
Launched in January 1993, it has a much longer track record than Bolton’s trust. Our data shows it has returned 218.88 per cent over the last decade.
It is currently trading on a discount of around 11 per cent.