In the wonderful world of collective investment, any £460m fund launch counts as a serious event these days but when it is an investment trust raising that sort of cash at kick-off, interesting forces are at work. I am not suggesting that anything Faustian took place – although I might have done had Fidelity China special situations hit its £650m target – but interesting even so.
Certainly, nobody at the group should be beating themselves up that the fund missed that target. After all, this was the biggest conventional onshore investment trust IPO since the Mercury European privatisation trust raised £549m at launch in March 1994 and almost double the next biggest such launch of the last five years, the £236m of the LMS Capital private equity offering in June 2006.
By my count, five factors seem simultaneously to be at play here. Two are fund group and fund structure which, for the sake of space, I would suggest – at least in financial adviser world – may cancel each other out. Advisers have always been quite keen on Fidelity, less so on investment trusts. What could possibly account for this change of heart?
Well, it could be my third and arguably most obvious factor – the stewardship of Anthony Bolton. After the miracles he has worked in the past, I dare say that there are investors who would be prepared to follow him into a Helmand Province special sits fund and, if he has identified China as the place to be, I won’t demur. After all, it is not as if this has been a recent conversion. If memory serves, for years, there was a small corner of Fidelity special situations that was forever China.
Where I might start to quibble is with a fund whose manager has committed – reasonably enough at the age of 59 – to sticking around for two years but which markets itself as a good investment opportunity if, among other things, “you are investing for the long term (at least five years or more)”. Bearing in mind the number of experienced China managers elsewhere who have given themselves a better than even chance of still being in situ after the London Olympics, £460m is a pretty butch call.
The next factor is China and, of course, Fidelity is by no means a lone voice in suggesting that there is gold in them there hills. Now, if I say that single-country funds make me uneasy, you will rightly point to the odd offering that invests exclusively in the US, in Japan and, of course, in the UK.
Maybe it comes down to maturity of market. Yes, I know quite a lot of reasons for investing in China – as it happens, I have recently written thousands of words on the subject for my forthcoming book, Investing In Emerging Markets – the Bric Economies and Beyond. Oh come on – that is the first time that I have actually plugged it by name.
Anyway, the publisher initially asked me to write a book solely on the Bric countries but I was not keen. I struggled to see why – regardless of the undoubted potential of those four economies – you would voluntarily cut yourself off from the likes of South Korea, Mexico, Vietnam and the other emerging markets or limit your chances to cut exposure if need be. I still do.
Maybe you are happy to judge just when to go overweight or underweight in China but I would prefer to leave that sort of decision to the likes of Young, Tulloch, Collings and the other generalists. I have made my choice both financially and literarily. A number of you have made yours to the tune of £460m. That is still a pretty butch call.
What else could be behind such enthusiasm? Oh you cynical, cynical souls. Honestly? Do you really think so? Hand on heart – which is making it difficult to type, so I will stop – I would hate to think there are advisers out there who have allowed the prospect of a little commission, my fifth factor, to trump any concerns over length of managerial tenure, risk of investing in a single emerging market or hitherto apparently unsatisfactory fund structures.
You think that I am being naive? I am not the one investing £460m which, as I may have mentioned, is a pretty butch call.
Julian Marr is editorial director of www.marketing-hub.co.uk and www.thought leadershiplive.com