Money Matters

How to ruin an independent financial adviser’s plans for a holiday home in Marbella/new Jaguar XK/ambitious kitchen extension:

1. Allow the only ‘star’ fund manager that anyone has ever heard of to come out of retirement
2. Announce that he is to launch a new fund investing in the most over-hyped market in the world
3. Let him tell the media that “the opportunity is simply too great to pass up”
4. Say that you are aiming to attract £630m initially
5. Then launch the fund as a London-listed investment company, which doesn’t pay commission to advisers on large lump-sum investments (only on Isas or monthly savings).

You’ve got to hand it to Anthony Bolton… for not handing over chunks of cash to intermediaries . He doesn’t need to. Just his reputation and the over-excitement over Chinese equities will be enough to raise £630m in days. Investors can apply for shares directly from February 26 until March 26 (or April 5 for online Isa applications). But if you’ve already decided you want to take a risk on China, I wouldn’t wait it until February 27 if I were you.

This is all rather clever. Not only does it save Fidelity millions in commission, it makes the fund’s outperformance a self-fulfilling prophesy.

Although £630m sounds like a lot, it’s a surprisingly low target compared with recent investment company fund-raisings. FT Money’s doyenne of the investment trust sector, Alice Ross, tells me that 3i recently raised £700m for its water-and-waste processing infrastructure fund, and F&C raised £965m for its Midlands-warehouse-buying commercial property fund.

Assuming that private investors find Bolton and Beijing somewhat more compelling, Fidelity’s China Special Situations fund will be massively oversubscribed. And all those investors who miss out in the offer period will be forced to snap up shares in the market when dealing commences on April 19 – pushing the fund’s share price to an immediate premium to net asset value.

Whether Bolton can find the “very many stock-picking opportunities” to justify such a premium will remain to be seen (and he can be seen here, talking about them). But for all those advisers, the biggest earning opportunity in decades has just been taken away.