Somerset Capital To Close

Amanda Cheesley Deputy Editor 11 December 2023

Somerset Capital To Close

Somerset Capital Management, an investment firm that focuses on global emerging markets, and co-founded by former government minister and Tory MP Jacob-Rees Mogg, will be wound down.

UK-based Somerset Capital Management, is set to wind down after suffering large redemptions and the loss of its biggest client, St James Place.

The firm lost two-thirds of its assets after it was dropped by SJP. This was part of the latter firm's drive to lower fees, leaving Somerset with $1 billion in assets, down from a peak of $10 billion in 2018. It shows the impact of regulatory pressure on wealth managers under the Financial Conduct Authority's new Consumer Duty, which requires firms to show that they are delivering good outcomes for consumers. See more here.  The business was co-founded 16 years ago by Conservative MP Jacob Rees-Mogg, who was a former government minister and prominent advocate for Brexit.

Somerset Capital said on Thursday that it is in advanced talks to transfer its top performing funds to a new investment advisor, but it will be closing its wider institutional business in London.

The firm has focused on investing in listed companies based in emerging markets including China, South Korea, India and Mexico. Its UK funds, including the top performing Somerset Asia Income Fund and Somerset Emerging Market Dividend Growth Fund, managed by portfolio manager Mark Williams, along with the investment team, are seeking to transition to a new investment advisor but would retain the existing fund and third-party infrastructure, Somerset said. If agreed, this will ensure the continuity of these funds and their managers, while positioning them for continued growth.

Here are some details of the funds.

Somerset Capital’s Asia Income Fund
The fund aims to generate returns over the long term via income and growth, with a concentrated portfolio of 40 to 60 well-managed companies. It has outperformed the index over a three and five-year period and is also performing well so far in 2023.

The fund is heavily weighted towards China and Hong Kong (40.9 per cent), followed by Taiwan (22.8 per cent) and Korea (9.7 per cent). Top 10 holdings include Taiwan Semiconductor Manufacturing Company (TSMC) as well as Taiwan’s Wistron, Korea's Samsung Electronics and Korea’s KB Financial Group. They also include China’s energy company CNOOC and Anta Sports Products. Top sectors include IT, followed by industrials, financials and consumer discretionary.  

Somerset Capital’s Emerging Markets Dividend Growth Fund
The fund aims to generate total returns over the long term via a combination of growth and income, with a concentrated portfolio of 30 to 50 well-managed companies. Although performance was down in 2022, it has outperformed the index in 2023 and in 2021.

The fund is heavily weighted towards China (28.2 per cent), followed by Taiwan (17.7 per cent), Brazil (13.3 per cent), Korea (12.2 per cent) and India (8 per cent). Top 10 holdings include Brazil’s energy company Prio SA, Taiwan Semiconductor Manufacturing Company (TSMC) and China’s manufacturing firm BYD Co, as well as India’s service provider BLS International Services. Top sectors include IT, followed by financials, industrials, consumer discretionary and healthcare.  

"It has been a privilege to manage capital for world-leading institutions and clients for over 16 years. I am incredibly proud of all we have achieved in that time through the hard work and skill of our dedicated team," Oliver Crawley, partner at Somerset, said. 

Crawley expressed confidence in the future prospects of the departing funds: "The current teams have delivered strong performance for their investors and continue to do so. We hope a transition can be secured which we believe will give the funds a bright future."

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