Bolton China trust in major buyback

The Fidelity China Special Situations investment trust has been forced to buy back millions of shares after investors sold out of the trust in anticipation of Anthony Bolton’s retirement.

Figures show the trust has bought back more than 30m shares since Mr Bolton announced his retirement on June 17, roughly 5 per cent of the trust’s total shares. Last week alone saw 8.9m shares purchased by the trust.

Buying back shares enables an investment trust to prevent its share price discount to the value of its assets from spiralling out of control.

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The Fidelity China Special Situations trust can buy back up to 14.99 per cent of its shares in any one financial year and has used up more than a third of this allowance in two months.

Mr Bolton said in June he would “do his damnedest” to get the trust’s shares to trade at a premium before he departs in April 2014, adding that the board would be active with its buyback policy.

Since then the shares’ discount to its net asset value widened to as much as 10.8 per cent and, in spite of last week’s buybacks, the shares were still trading at a 6.3 per cent discount on Friday.

Data from July 1, two weeks after Mr Bolton announced his retirement, suggests Hargreaves Lansdown was the biggest seller of the shares as its clients pulled out.

The Bristol-based broker was one of the trust’s biggest promoters when it was launched in April 2010.