Posts Tagged ‘Warren Buffett’


Anthony Bolton was an investment star. When he turned to China, the investment community waited with bated breath. They are still waiting, and now Mr Bolton has announced his planned retirement.

If you had invested £100 into Anthony Bolton’s UK Special Situations fund, and left it there for 28 years, it would have been worth £15,220. Not a bad return.

No wonder Mr Bolton was heralded as the UK’s answer to Warren Buffett.

And when the great man turned his considerable ability to mastering China, investors flocked to his cause.

That was in April 2010. Alas, shares in The Fidelity China Special Situations Fund run by the investment star, have fallen 17 per cent or so since then. Not a good return.

In fairness to Bolton the CSI 300 – that’s the stock market index tracking Chinese shares that investors pay the most attention to – has fallen from 3,345 in April 2010 to 2,403 at the time of writing, so it is hard to make money at such times.

Maybe the investment approach adopted by Mr Bolton in the UK for all those years just does not work in China.

Maybe, it’s just a matter of timing. The Bolton investment strategy is quite risky, and high risk means high volatility. At certain times investors in his funds lost money, but if they stayed true, in time they did very well indeed. Maybe the same could have been said for Bolton’s China’s fund, it is just that right now is a not a good moment to make a judgement.

Maybe the problem was that Mr Bolton just doesn’t know China well enough.

The man set to take over at the Fidelity China Special Situations is Dale Nicholls. He has managed the Fidelity Funds Pacific Fund since September 2003 and over that period he has returned 154 per cent. So that’s not bad, either. Fidelity says: “Dale is a bottom-up stock picker with a growth bias and a significant tilt towards smaller and mid-cap companies.”

Maybe though the problem for Anthony Bolton – and this may apply to his successor too – is straightforward regression to the mean.

If an investment delivers a one-hundred-fold return, we can be fooled into thinking we had more influence than actually we did. Should we repeat our efforts many times, regression to the mean may mean that our average performance is more mediocre. A sportsman, or pop star, or serial entrepreneur may enjoy a run of success, but the more often they try to repeat their success, the more likely regression to the mean will occur.

Leonard Mlodinow of the California Institute of Technology used the metaphor “The Drunkard’s Walk” in his book of that name to explain the idea. He tells the story of Sherry Lansing, top brass at Paramount, who commissioned ‘Forrest Gump’, ‘Braveheart’ and ‘Titanic’. She was a “genius”, who then “lost her touch”. She was fired, following one flop after another.

In the year or so after her departure, the studio enjoyed a run of hits. So, its decision to fire Lansing was proven right, or so it appeared. However, films such as ‘War of the Worlds’ and ‘The Longest Yard’ had already begun under Lansing’s tenure. Mlodinow also quotes a Hollywood executive who reportedly said: “If I had said yes to all the projects I turned down, and no to all the other ones I took, it would have worked out about the same.”

© Investment & Business News 2013


To many he is a hero. He is the investor extraordinaire, the man who is now ranked fourth richest in the world, thanks to his all-round savvy. He is, of course, Warren Buffett. But was he lucky?

What about George Soros for that matter? He may have defeated the Bank of England, made a fortune by betting against central banks, and may be attempting – riding on the back of his financial record – to present himself as possessing sound academic credentials, but was he lucky?

Have you ever played that game at a party, when you all stand up, and have to raise either your right or left hand. A judge then tells all those who put, say, their right hand up, to sit down. The rest once again have to choose between right and left hand. The judge decides again which half has to sit down. You keep going until there is only person left. This person is the winner.

With the benefit of hindsight, you can see how that winner made a series of good calls. Let’s say the winner got the call right seven times in a row. What are the odds of that? Well, to be precise they are one in 128.

Of course you know that it was down to luck. If there were 128 people at the party, the odds of any one person wining such a game were one in 128, but the odds that someone might win were 100 per cent.

Now make the game more complex. Involve derivatives and shorting, and leverage and balance sheets. And say the odds of success are one in six billion. In a planet of six billion people those odds will smile on one person, but were they any cleverer than the winner of our party game?

That is harsh. Buffett and Soros are clever. And they are savvy, and there was more to their success than pure luck, but how much was luck, and how much was judgement? How much was down to a particular strategy happening to be the right strategy for the time? In an economy that is steadily growing over time, an investor who believes in a taking long term bets may well be a winner. Supposing instead that your investment strategy involved betting on companies named after a fruit, and you launched your strategy about ten years ago. You would have done pretty well. Does that mean your strategy will always work?

Anyway, whatever you think, Bill Gross – who sits at the upper end of the pantheon of great investors next to Buffett, Soros and Jim Rogers – wrote in an investment outlook he calls ‘man in the mirror’: “All of us, even the old guys like Buffett, Soros, Fuss, yeah – me too, have cut our teeth during perhaps a most advantageous period of time, the most attractive epoch, that an investor could experience…perhaps it was the epoch that made the man as opposed to the man that made the epoch.”

He said: “There is not a Bond King or a Stock King or an Investor Sovereign alive that can claim title to a throne.”

©2013 Investment and Business News.

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