Warren Buffett was quoted to have told a group of students last year: “the 19th century belonged to England. The 20th century belonged to the US. And the 21st century belongs to China. Invest accordingly.” But for a person that stays close to his comfort zone, China will not be the new territory that Buffett will attempt to conquer. This new adventure belongs to a British investment legendary. Anthony Bolton, a former star fund manager, came out of retirement to take up this challenge. Believing that China is an opportunity of a life time, he decided to relocate to Hong Kong and will start a China fund for Fidelity next month. His efforts will have great significance for many serious investors. We will be able to witness and learn from his experiences as he adapts his traditional Western approach to China.
Anthony Bolton represents the best of investment tradition in the west. He managed Fidelity’s Special Situations Fund for 25 years and achieved a stunning 19.5% annual return. As revealed in his book “Investing Against The Tide”, he is a classic contrarian value investor. Will his approach work in China? Many local investors trade on rumors and government policy directions. And many Western investors from far away can trade only on macro-economic observations. Can company-specific research provide unique insights when many question the accuracy of financial reports? Can we find sustainable competitive edge in any company or emerging growth theme for long term investing in this fast-changing country? Anthony Bolton may be the best value investor to help answer these questions.
Value investing calls for courage and independence. This may be particularly true for China market where policy news and momentum drive most of short-term performance. Bolton certainly has demonstrated this necessary quality in his long career. This quality of courage is clearly in display as he came out of retirement and stakes his reputation on this China opportunity. As a result, we will be able to witness a master attempting true value investing in this immature market.
Adapting value investing to the China market may require flexibility and open-mindedness. Corporate governance and fundamental data, as understood in the West, may not apply here. Bolton is not new to this. He successfully navigated his Fidelity fund in the early years of the European markets. He has also shown flexibility in his investment approach. For instance, he openly supported, in his book, the use of technical analysis as a timing and trouble-shooting tool to complement fundamental analysis. This well-rounded approach may serve him well in the China market.
Lastly, Bolton is as well-equipped to take on this challenge as anyone can be. Fidelity’s local team will provide him with language assistance and access to management. He already has experiences with China as he invested about 5% of his fund in Chinese companies in the last few years before he retired. Fidelity is now applying for quota for direct investment in the local Chinese market. Most China funds invest indirectly through markets such as Hong Kong.
Let’s wish him success and thank him for taking the lead. We will all learn from his efforts. Skeptics reasonably question whether traditional value investing can work in China. Bolton believes he will prove them wrong as he did with skeptics in his early European experience. It will certainly take more than Bolton to establish the validity of long term value investing in China. I will track on my blog the progress of Bolton, as well as many others to come. This collection of wisdom and experiences may help us better invest and profit from the economic expansion of China.
Disclosure: no position