Bolton exclusive: the challenges in China

27 October 2010

One of the main challenges in investing in China is knowing who to trust, reveals Anthony Bolton in an exclusive interview with Moneywise.

The iconic fund manager who has been in Hong Kong managing Fidelity China Special Situations since April, says 95% of the people he did business with in the UK were trustworthy. In China, however, he says a “higher percentage of people are stretching the truth in one way or another”.

Bolton came back to active fund management at the start of this year to take advantage of what he felt was a unique investment opportunity in China and despite his misgivings he still feels there is money to be made in the region.

“There seems to be a sweet spot in emerging markets when the growth hits a point where people for the first time can afford cars etc. This lasts for 10-15 years and then the market is matured and it slows down,” he says.

Bolton uses many of the techniques picked up from a life of managing money in Europe to the same effect in China. “I have the advantage that I have seen lots and lots of companies over time and that sometimes gives me a different perspective,” he says.

Other fund managers have expressed concern that investors are going into China for the wrong reasons, and investing with Bolton could certainly show an element of this.

During his 27-year reign at Fidelity Special Situations, a UK-based open-ended investment company (OEIC), Bolton drove annualised returns of 19.5% compared to benchmark returns of 13.5% in the FTSE All-share.

And when he announced his return to active management with the launch of a China fund some advisers were sceptical, saying investors would follow Bolton into China based on his previous record rather than the suitability of their own risk appetite or portfolio.

But David Coombs head of multi-asset investments at Rathbone Unit Trust Management, is concerned about investment in China for other reasons: “China is an incredible opportunity in the long term, but western money (directly or indirectly) is being sucked in and not necessarily finding a smart home there,” he says.

“So far, the China consumer story has been played out to script, but aspirational spending will increasingly be problematic for China’s government,” he adds.

In fact Bolton shares some of Coombs' concern, but says it is not an imminent problem. “At the moment there are enough people who haven’t got consumer goods that still want them and are excited about them. But they will want more freedom and less censorship and that is going to be a challenge for China,” he explains.

Despite this, he doesn’t think the consumer story will be effected because he thinks the Chinese government know they have to support consumerism in order to shift from an export-based, heavily reliant economy.

“If I’m right about China – and like anything, predicting the future is a risk – I think it’s going to be the demand economy in Asia over the medium term,” he says.

“There is always pressure in this business and there is no automatic way to generate profit, but I didn’t want to be standing here in 10 years time thinking I could have done it,” he concludes.

To read the interview in full look out for the December issue of Moneywise, which hits the newsstand on 25 November.

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