Fidelity's Dale Nicholls Doubles Investors' Money

After a less than auspicious start under legendary money manager Anthony Bolton, Dale Nicholls has transformed Fidelity China Special Situations

David Brenchley 9 October, 2018 | 7:40AM

Shanghai, China, emerging markets, passive funds, ETF

Our active versus passive series of articles charting the performance of a star manager versus a fund tracking its benchmark index recently ran through the performance of Anthony Bolton’s UK-focused Fidelity Special Situations fund.

Bolton’s performance throughout his tenure as manager was exceptional, and cemented his reputation as one of the top UK fund managers. However, his second career in fund management was less impressive.

Bolton broke from his usual remit and launched Fidelity China Special Situations (FCSS) in April 2010, with investors pouring cash into his new venture despite him having little to no experience investing in the emerging nation.

And the formative years of the trust disappointed. Bolton’s first three years saw his offering lose 7.75%, compared to a loss of 6.12% by our comparator, the iShares China Large Cap ETF (FXC).

His final year in charge before retiring for good was much more successful, producing a near 15% gain compared to the ETF’s loss of 8%. That meant through his tenure as a whole Bolton outperformed, returning 5.76% versus a loss of 13.63% for the index.

Still, Bolton was rather scathing when asked about his views on the Chinese market after his retirement.

The Nicholls Revival

In April 2014, he handed the reins of the trust over to a more seasoned China stocks investor in Dale Nicholls, who had been managing Fidelity’s Pacific fund for the previous 11 years. It’s been a decision that has paid off.

Since taking over the management of the trust, Nicholls has more than doubled investors’ cash, returning 107.8% in the intervening four and a half years. That compares to the 62% returned by the iShares ETF.

The trust currently has a Morningstar rating of Bronze. Despite the view that fees could be improved significantly, analyst David Holder thinks “the fund has considerable merit for investors seeking access to this dynamic and increasingly relevant economy”.

“There will be bumps along the way given the structure of the portfolio and the nature of the market, but we feel that Nicholls is a good fit for this fund given his experience in the region and his use of the substantial regional analyst cohort,” Holder adds.

That volatility is borne out in year-to-date losses, which are higher for the investment trust, down 12%, than the ETF, down 8%. Indeed, it was the third-worst performing investment trust rated highly by Morningstar analysts in the third quarter.

Still, the only previous full calendar year that the trust has under-performed compared to the ETF was 2016, and that was a closely run thing.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Fidelity China Special Ord194.20 GBX-0.21
Fidelity Pacific Y-Acc-USD18.55 USD-0.38
Fidelity Special Situations3,770.00 GBP-0.11
iShares China Large Cap ETF USD Dist GBP8,802.00 GBX-0.69

About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk