Winterflood Investment Trusts has issued concerns over Anthony Bolton’s Fidelity China Special Situations trust, questioning its suitability for retail investors.
The £482.2m trust has underperformed its benchmark since launch in April 2010, with its net asset value falling 23 per cent compared with the 14 per cent decline seen in the MSCI China index.
The underperformance, which Bolton has described as “disappointing”, has been attributed to a bias to small- to mid-caps and the trust being geared in a falling market.
Winterflood says the fund’s level of gearing, which stands at about 20 per cent, adds “substantial risk” to the portfolio. Winterflood adds that the manager’s use of hedging creates complexity around the fund and dilutes its investment message.
Winterflood says: “Although we would expect the fund to perform strongly in a bull market, due to its gearing and mid/small cap bias, we would question the suitability of this fund for the retail investors.”
Fidelity declined to comment.
Whitechurch Securities managing director Gavin Haynes says his firm did not recommend the trust at launch as it would take time to see if Bolton could translate his performance in the UK into the Chinese stockmarket. Haynes adds: “Performance over two years has not done anything to change our view.”