Earlier I outlined six reasons to invest in Anthony Bolton’s Special Situations China Trust.
Yet as Spinal Tap almost said, what’s life without a big ‘but’?
So to continue with my special Anthony Bolton extravaganza, here are six reasons to avoid betting on Bolton.
1. You can’t beat the market (twice)
I can’t ignore the obvious argument any longer – that Bolton was just very lucky to trash the market last time and he won’t be so lucky again. The vast majority of active fund managers fail to beat passive vehicles after charges over time.
2. What does Bolton know about China?
I’ve read that Bolton’s made some trips to China over the years, and that he’s been in Hong Kong for three months. No doubt he knows his way around sweet & sour pork with prawn crackers – but what’s his ‘in’ in this famously relationship-based country? Fidelity Special Situations was not an emerging market fund. He’s not got a proven edge here.
3. £630 million is still a lot of money
It’s not as unweildy as the £6 billion Bolton ended up running at Fidelity when he became a victim of his fund’s success, but it’s still a lot of capital to put to work. Buffett has claimed he’d make 50% a year investing just $1 million; he delivers on average less than half that for Berkshire. Size is bad, since it’s hard to invest in microcaps without moving the price or taking on too much risk.
4. China is a bubble, a fake economy, et cetera
There’s no doubt China is the world’s largest manufacturer – just take a trip to your nearest mega-dock or look at your next shopping bill. What is less clear is whether China’s semi-state-managed growth and the companies that thrive under it are truly investable. This isn’t like Bolton’s Britain of the early 1980s, when hyper-competitive companies destroyed the weak and revolutionised the country. China is bureaucratic bingo.
5. No past record to look at with this new trust
Because Bolton’s trust is brand new, we can’t look at its holdings, its past trades, or how accurate its directors’ predictions have been. We can’t compare its performance against its peers. These methods only give limited insight as to future performance, but here we’re investing blind.
6. Bolton is no spring chicken
Unlike some, I see this as the smallest point; I’ve observed that great investors often live and work into old age, whether by accident or something more profound. Nevertheless, Bolton isn’t immune to the actuarial laws of nature. He’s 60 years old, and is at more risk of a heart attack than at 30.
Coming next: The final instalment – my personal decision about whether I’ll put money into Bolton’s China investment trust.
Hi Monevator. As a confirmed China sceptic I think I can add something to your point 6. I’m sure I read Bolton say somewhere that he only plans to start this fund and run it for a couple of years, before handing over. Of course he might change his mind, but I’d think twice if a major reason for buying the fund is Bolton’s name. Also I read somewhere else that the Investment Trust is going to pay financial advisers who persuade their clients to invest a fee, which I presume will be a drag on performance as very few investment trusts pay commissions. Maybe a number 7?
.-= Richard Beddard on: F_Score scores in the UK =-.
@Richard – Yes, I’ve read the same thing about Bolton, and obviously it’s an extremely valid concern to raise. Given though that he retired two years ago to much fanfare and is already back I’m not convinced he’ll before again within a couple of years, although 28 years is obviously pushing it. I’ve been collecting a list of great investors who are still working well into their 70s (in some cases into their 90s) as referenced in the article linked to above.
Great to see you commenting here! 🙂
The FT Money podcast for this week said that Fidelity would be paying IFAs commission if they get clients buy into the fund via the Fidelity ISA platform or monthly saving plan.
I don’t think it would be proper for the IT itself to pay commission; that’s not in shareholders interests, right?
I’ve put money into initial fund raisings for venture capital trusts (vcts) in recent years where your standard braces-and-brunch broker will knock 5% off your initial investment which they take in commission fees. Going through bestinvest or that sort got you extra shares refunded by the discount broker.
So I s’pose the same could happen with this IT?