Money Matters

Clearly, writing a column for FT Money – as well as a book and several choral compositions – just wasn’t enough for Anthony Bolton.

In Hong Kong earlier today, Fidelity’s star fund manager announced that he was returning to running money, with the launch of a new China focused fund – just two years after he stepped down from a 28-year stint running Fidelity Special Situations.

He gives his reasons in an exclusive column, which will appear in FT Money on Saturday (and on ft.com later today).

Already, the news has met with an ecstatic welcome. Chelsea Financial Services’ managing director, Darius McDermott, said: “Nothing quite beats a comeback. Boxing had Ali; cycling had Armstrong; fund management now has Anthony Bolton.” Bestinvest’s senior investment adviser, Adrian Lowcock, said: “Antony Bolton coming back to manage money is going to attract a lot of interest from investors. It would be a brave investor to bet against him.”

I think it will be a fascinating experiment in whether Anthony’s fundamentals-based, due diligence approach to stock-picking really can work in China. Consider some of his recent FT Money columns…

On picking growth stocks:

Most companies consume cash as they grow and release cash as they shrink, so a sign that a firm is expanding too quickly can spell danger, while those shrinking are often safer, though there are some important exceptions… Investors can do their own calculations of a company’s financial strength by studying the balance sheet, profit and loss statement and cash flow statement.

We’ve all heard the apocryphal stories about Chinese companies holding three sets of accounts: one for the authorities, one for domestic investors and one for outsiders. Which set of numbers will Anthony get to study?

On corporate governance:

Our process when assessing companies in which we are invested, or looking to invest, is quite demanding of managers’ time. It requires the chief executives or chief finance officers to attend regular meetings with our investment managers and analysts… Part of being an involved and responsible shareholder is to be prepared to give feedback to management – on matters such as board composition, remuneration or strategy… In general, Britain should be proud of its corporate governance system, which I believe is more effective than in many other countries.  

 I’d like to be a fly on the wall in his meetings with managers of Chinese domestic companies.

 On conviction investing:

When you form your initial investment thesis, it’s useful to think about the “counter” thesis – namely, if your thesis turns out to be wrong, what might be the reasons it doesn’t work? By mulling over the factors that might negate the thesis, you should be better placed to spot their emergence earlier.

I wonder if Anthony has thought about the studies by the London Business School and Lombard Odier proving a zero correlation between emerging markets GDP growth and total shareholder returns?

But if anyone can make a stock-picking approach work, Anthony can. You don’t achieve an annualised return of 19.5 per cent over 28 years through anything other than excellent judgement.

So I wish him well – I’ve never met a harder working or more honest fund manager, or a more thoughtful columnist.  I just hope inscrutable Chinese companies realise the kind of scrutiny they’ll soon be under!