The search to replace Britain’s most successful investor is over. Sanjeev Shah, manager of Fidelity European Aggressive, will take over the UK half of Anthony Bolton’s Special Situations Fund. It’s a daunting task – Bolton has returned 15,262.7% since December 1979 against 3,421.0% for the FTSE All Share. Shah has had a good run at Fidelity UK Aggressive, returning 77.8% against 49.7% for his benchmark between October 2002 and August 2005. But his European Aggressive fund has been less impressive, returning 32.9% against 38.6% for the sector since August 2005.
Some fear that Fidelity has relied too much on Bolton. According to Bestinvest, £800m in total has been pulled out of the Special Situations fund since it was split into global and UK halves. “The fund outflows, the poor performance across a range of funds and the withdrawal of Anthony Bolton from active fund management mean that Fidelity is not a place where I would want to have investors’ money,” Brian Dennehy of Dennehy Weller tells The Times. He says that investors should look at alternatives, such as M&G Recovery (see story on the facing page), Artemis UK Special Situations and Jupiter Undervalued.
So was Bolton just lucky? “You can’t tell me he’s been lucky. It’s damned impressive,” Mark Dampier of Hargreaves Lansdown tells Reuters. But as Burton Malkiel, economics professor at Princeton University and author of A Random Walk Down Wall Street, says, “The very small numbers of really good performers we find in the investment management business actually is not at all inconsistent with the laws of chance.” Nassim Nicholas Taleb echoes this in his 2004 book Fooled by Randomness. He posits a scenario involving 10,000 fund managers. Every year, half outperform and half underperform. After the first year, the 5,000 losers are fired; after the second, 2,500. After five years, there are 313 winners left, all with superb track records. When one fails, analysts try to pinpoint why he fell from grace. “They will find something he did before when he was successful and attribute his failure to that. The truth will be, however, that he simply ran out of luck.”
We don’t like the idea of entrusting our investments to someone else’s luck. That’s why we still say it’s better, and cheaper, to use trackers or exchange-traded funds to buy into the markets you like (we are keen on Japan and Germany, to name two). For a wide range of ETFs, visit www.ishares.co.uk.