I wrote earlier about how superstar investor Anthony Bolton is shimmying down the retirement home drainpipe to head East, where he will find companies for his new Special Situations China Trust.
But should we back Bolton’s adventures with our money?
Here’s six good reasons to consider it.
1. Bolton’s track record
Over 28 years, Anthony Bolton’s Fidelity Special Situations fund produced an average return of 19.5% a year. That’s incredible – sufficient to turn £10,000 into £1.4 million.
2. China is an inefficient market
Everyone says half the companies listed in China are a crock. An old dog like Bolton should be able to sniff out the good profitable ones (and be part of the process that turns the market efficient, incidentally).
3. Bolton isn’t in it for the money
He’s not some 30-year old hot shot making a bid for glory. If anything Bolton has more to lose than gain with this China adventure.
4. It’s an investment trust, not a fund
Not only are investment trusts better value for investors because of restrictions on advertising – they also deliver better results, partly because they can borrow to invest. Most importantly, a trust is a closed-ended vehicle, which will limit the size of Bolton’s fund as well as sidestepping the problem of having to sell shares to meet panicky redemptions. (Trusts can trade at a discount to NAV and are riskier, however).
5. They’re not making Warren Buffett any more
If Buffett left Berkshire Hathaway and started a new fund, investors would be picketing his porch. Anthony Bolton’s record isn’t so different – he’s arguably a purer stockpicker – so maybe we should stand by our man. (Wouldn’t you kick yourself if you missed out on investing with our Buffett twice?)
6. China will at some point revalue the yuan
Investing overseas can diversify your portfolio at the cost of currency risk. In the case of China, I think the currency risks are very much to the upside in the longer term, meaning your Chinese assets should eventually be worth more in sterling terms.
Of all these six reasons, the critical one is track record. Academics can debate it all they like, but it is hard to argue that a 28-year long record of outperformance is pure luck. Bolton is surely doing something right?