The legendary investor talks about his move to China and his belief that the future lies in the East.
By Paul Farrow
Published: 12:33PM BST 16 Jul 2010
Anthony Bolton: ‘I’m not following the UK like I used to. The centre of gravity is shifting eastwards’
Anthony Bolton’s track record as a UK fund manager will go down in the annals of history. Thousands of investors will have benefited from his extraordinary ability to find value in companies where the majority couldn’t. He turned a £1,000 investment into £147,000 over a 28-year period.
His decision to stand down from managing funds in 2007 was not unexpected, but the decision to make a comeback late last year was.
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The China story persuaded Mr Bolton to defer his retirement and relocate to Hong Kong. He reckoned that China showed many of the similarities with Europe as it was in the early part of his career and was in an investment “sweet spot”.
His new fund – the Fidelity China Special Situations investment trust – raised £470m at launch in April, lower than the £630m Fidelity had hoped for.
Three months on, he has 150 company visits and a portfolio of around 100 stocks under his belt. The trust’s share price is slightly down at 98.75p from £1.
Do you find it difficult getting under the skin of Chinese companies?
I am seeing the majority of companies for the first time. Some may not be new to Fidelity but they are new to me.
I had been expecting that the majority of meetings would be in Mandarin, but that isn’t the case, as many are listed in Hong Kong. Most are in English. The general quality of the meetings is reasonable, although I have had one of the worst I have ever had. I’m not sure the executives knew anything and I had to take them to task for wasting my time.
But this is the challenge. While company meetings are useful, you have to cross-check what they say and so much of my time has been used to build up a network of market researchers, consultants and due diligence experts to help me.
What is your investment strategy?
The companies I am investing in fall into two broad categories. Firstly, companies that I believe have the ability to grow substantially over the next 10 years on fair valuations. These are at a premium to Western-equivalent valuations, but often not a significant premium. Many of these have similar business models to ones that I have observed grow significantly in the West and which have been rewarding for investors.
For example, CN Insure, the largest insurer in China, reminds me of MLP, a German insurer I used to invest in which was one of the great growth stocks of the 1990s. Insurance in China is underdeveloped and the area of broking is growing rapidly.
The second category are cheaper than their Western counterparts and are completely mispriced. My weighting in small caps is 22pc compared to an index weighting of 1pc, so it is a pretty big play of mine.
Most of your holdings are listed in Hong Kong. Why?
Governance and quality of information are still issues but so too are the valuations, which tend to be much higher for China-listed stocks. But, with the bear market in the mainland-listed companies, many are now trading at discounts to net asset value and I have been taking advantage by buying those rather than their equivalent listed in Hong Kong.
Do you have concerns with China’s economy?
The economy is certainly slowing down and the authorities have been introducing measures to cool the property market. There are risks with such measures, but the Chinese will not want to kill growth. I still think the economy will deliver 8pc GDP growth, rather than 10pc. This is still significantly higher than the Western world.
Is the property bubble in China about to burst?
Chinese authorities took draconian measures to dampen the property bubble. The question is whether this will be overkill – there is no sign yet, but we have to watch it. There is a risk to property shares and there are worries that it could affect the banking sector. There is a chance that property turns into a rout and we have a huge falls in values but I think this is unlikely. There is still demand for residential property.
Are we heading for a global double-dip recession?
We had the financial crisis followed by a very sharp downturn in economic activity followed by a sharp upturn. That recovery was masking the true state of economies. They are not going to be like they were before the crisis but are going back to a period of low growth. I’m not expecting a double dip.
If we do get one, China is not immune, but it is moving away from the export market (which would be most affected) to domestic consumption. Most of the companies I have bought will benefit from that growth in domestic consumption.
What about the UK and do you feel under pressure?
I’m not following the UK like I used to. Part of my reason for coming here is the centre of gravity is shifting eastwards.
There are big expectations of me. Pressure comes with the job, but I don’t feel it too much. Does that guarantee I’ll make it a success? All I’ll say is that I’ve worked bloody hard since I’ve been here and I’m giving it my best shot.