MV: How would you describe the past year for the China Special Situations fund?
AB: I think, as you've probably read in reports, I'm disappointed. To be down 20-odd per cent from the issue price is not where I was hoping to be after 18 months of running the fund. That said, everything's been difficult in equity markets over the past six months, so it's not unique to China. But the first six months went pretty well, and then the last 12 months have been difficult - and particularly the last six months of that. The conditions in September were as bad as anything that I've experienced in the whole of my career.
MV: Were the challenges of carrying out due diligence on Chinese companies greater than you initially imagined?
AB: I think the main thing that's hurt me is being geared into a falling market and having high exposure to small and medium-cap stocks. So that hasn't been ideal in a very difficult market position. On the challenges of China, I've said there were a number of things I was aware of - but actually doing it day in day out, they were more acute than I thought. And the challenge of "can you believe what you're told?" and "are the figures real figures?" - the quality of the information that you're getting - is definitely an issue. It was particularly an issue in the reverse merger stocks and I hadn't realised - which I should have done really - what a loophole that was. I had wrongly thought because these were US-listed, the standards that they would be subject to would be high. But, actually, the reverse merger is sort of a gap in the system. It allows companies to become listed in America without going through the normal process.
David Fuller's view We know that Anthony Bolton is a class act among investment managers but even he cannot buck what has been a bear market in China. If he could do it all over again, it would be understandable if he wished he could launch the fund today rather than eighteen months ago.
I commend the rest of this interview to subscribers, not least because Matthew Vincent asks the right questions. Also, do not miss his comments on the UK and USA, and the outlook for 2012. I think he is right.
Please listen to Tuesday's Audio for a review of market prospects.