Bolton’s China fund suffered losses after two firms accused of fraud
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Fidelity China special situations fund manager Anthony Bolton has revealed that his fund suffered losses after two investments in US-listed Chinese companies were accused of fraud.
According to reports, Bolton says his team are now spending more time on due-diligence after they underestimated the risks of investing in China. Bolton’s fund raised £460m when it launched in April 2010, about 15 per cent of his portfolio is listed in the US.
Bolton has liquidated the funds’ holdings in several reverse merger stocks at a loss, including the two accused of fraud. One company, China Integrated Companies, lost 90 per cent of its value after it was accused of fraud by short-sellers and its auditor KPMG resigned. The company, which is listed on the Nasdaq, has denied the allegations and has started an independent investigation.
Bolton would not name the other company involved and said the losses represented a small part of his overall portfolio.
The fund’s share price has declined 15 per cent in 2011, with Bolton citing a put option on the Kospi stock index - which was designed to protect against tensions between North and South Korea.
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