Fidelity has revealed Anthony Bolton's China Special Situations investment trust will carry a performance fee equal to 15% of any outperformance of its NAV (excluding gearing) over the MSCI China index plus a hurdle rate of 2%.
The asset manager told investors there will also be a maximum performance fee payable in any year equal to 1.5% of NAV and any outperformance above this cap will be carried forward.
If the fund underperforms the hurdle rate in any year, the underperformance must be made good before any further performance fee becomes payable in future years.
Its performance fee comes on top of an AMC of 1.5% of the total NAV with 0.5% trail commission for IFAs available on ISA investments. There will be no initial charge during the IPO on ISAs but this will rise to 3.5% thereafter.
Fidelity has been actively marketing the trust to advisers in the run-up to an initial £630m capital raising, with shares issued at £1, which will run from 26 February to 5 April. This is ahead of a 19 April admission to the London Stock Exchange.
Bolton says he intends to get quick exposure to the markets once the offer period on the trust is complete.
He says: "It will depend on the conditions at the time, but my intention is to put the money to work quite quickly into the markets and use futures to get the market exposure. This will then allow me to invest in individual stocks more slowly over time. However, I don't want to be drawn exactly on how quickly I will be invested but it will be pretty quickly.
Gearing on the trust can be up to 30% but Bolton believes it will be nearer 20%.
Bolton says: "I also have the ability to use derivatives in a similar way to the Ucits III powers I had on the Special Situations fund in the last few years and which it still has. In particular, this will allow me to take short positions on individual stocks which are over-valued."
"It is likely there will be less holdings in the fund than I had in some of the European and Special Situations funds as the amount of money will be smaller, but hopefully the portfolio will be more concentrated as a result. The portfolio will also not be currency hedged."
Bolton says China Special Situations will have a higher tracking error and be less benchmark aware than other China funds in the Fidelity range. It will focus on capital growth and investors should not look for dividends.
The trust will be run using his famous contrarian approach with a particular focus on small and mid cap names but not ruling out larger cap stocks.
China Special Situations plans to invest in A, B and H shares as well as some China focused companies listed elsewhere in the world. It can also invest in unlisted companies. At launch, exposure to A shares will be through structured instruments, but Bolton has applied to invest directly in these shares and hopes this will be possible over the summer.
The trust will be available through FundsNetwork as well as other platforms and SIPPs depending on their capabilities.
If the trust is hugely oversubscribed, there will be a scale back on applications. However, the £400m set outside for private investors will not be reduced to meet any increase in institutional demand.
Fidelity China Special Situations PLC shares will be eligible for ISA investments and applications may be made via the Fidelity ISA for either or both of the current and next tax years.
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