Bolton's China trust raises £460m

Anthony Bolton's Fidelity China Special Situations trust has raised £460m in one of the UK market’s most successful fund listings for 20 years.

While the fundraising was less than the maximum £650m subscription, it is still the largest listed China equity fund in the UK.

The vehicle is set to list on the LSE on 19 April and is expected to sit in the FTSE 250 after the next index review.

Bolton says he is "absolutely delighted" with the support from investors and advisers in the UK market.

"Fidelity China Special Situations will be the largest emerging markets equity fund new issue since 1990 as well as the largest China equity fund listed in the UK which is a fantastic achievement," he says.

"I firmly believe that China is the investment opportunity of the next decade."

Bolton himself subscribed for 2.5 million shares in his new China Special Situations trust. Fidelity International bought 15 million shares with BRJ Bateman, vice-chair of FIL, investing £1m. 

The trust will carry a performance fee equal to 15% of any outperformance of its NAV (excluding gearing) over the MSCI China index plus a hurdle rate of 2%.

There will also be a maximum performance fee payable in any year equal to 1.5% of NAV and any outperformance above this cap will be carried forward.

If the fund underperforms the hurdle rate in any year, the underperformance must be made good before any further performance fee becomes payable in future years.

Its performance fee comes on top of an AMC of 1.5% of the total NAV with 0.5% trail commission for IFAs available on ISA investments. There will be no initial charge during the IPO on ISAs but this will rise to 3.5% thereafter.

Bolton says he intends to get quick exposure to the market.

"It will depend on the conditions at the time, but my intention is to put the money to work quite quickly into the markets and use futures to get the market exposure," he says.

"This will then allow me to invest in individual stocks more slowly over time. However, I do not want to be drawn exactly on how quickly I will be invested but it will be pretty quickly."

Gearing on the trust can be up to 30%, but Bolton believes it will be nearer 20%.

"I also have the ability to use derivatives in a similar way to the Ucits III powers I had on the Special Situations fund in the last few years and which it still has. In particular, this will allow me to take short positions on individual stocks which are over-valued," Bolton adds.

"It is likely there will be less holdings in the fund than I had in some of the European and Special Situations funds as the amount of money will be smaller, but hopefully the portfolio will be more concentrated as a result. The portfolio will also not be currency hedged."

The renowned investor says his China Special Situations will have a higher tracking error and be less benchmark aware than other China funds in the Fidelity range. It will focus on capital growth and investors should not look for dividends.

China Special Situations will be run using Bolton's famous contrarian approach, with a particular focus on small and mid cap names, but not ruling out larger cap stocks.

China Special Situations plans to invest in A, B and H shares as well as some China focused companies listed elsewhere in the world. It can also invest in unlisted companies.

At launch, exposure to A shares will be through structured instruments, but Bolton has applied to invest directly in these shares and hopes this will be possible over the summer.

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