Fund manager founded by Sir Jacob Rees-Mogg to close after client withdraws £2b

Somerset Capital Management is in talks to transfer its key UK funds to another firm, but will wind down the wider business

The fund manager co-founded by Sir Jacob Rees-Mogg is winding down after its largest client withdrew billions of pounds.

London-based Somerset Capital Management said it was in advanced discussions to transfer its key UK funds, along with their investment managers, to a new investment adviser, but would be “closing its wider institutional business in London”.

Somerset has seen its assets under management plunge after its biggest client, St James’s Place, last month ended its relationship with the firm. It dealt a massive blow as it withdrew a reported 2.5 billion US dollars (£2 billion) in assets and left remaining clients rattled.

It is also a major blow for the former business secretary, who in good years took dividends worth as much as £800,000 from the firm.

Sir Jacob co-founded Somerset with two other colleagues in 2007, and the Conservative MP has retained a minority stake in the firm.

At its height five years ago, Somerset had around 10 billion US dollars (£7.9 billion) in assets under management and, not long after, is understood to have rejected a takeover approach worth up to £90 million from rival Artemis Investment Management.

But the recent client outflows have left it with a reported 1 billion US dollars (£794 million) in assets as of October.

Somerset has in the past courted controversy for Sir Jacob, with the firm’s focus on emerging markets meaning it has invested in the past in Russian and Chinese companies.

One of the controversial holdings of the firm was a stake in Moscow-based internet giant Yandex, a major search engine dubbed Russia's Google.

It also invested in Yum China, the country’s biggest restaurant group.

Oliver Crawley, partner at Somerset, said: “It has been a privilege to manage capital for world-leading institutions and clients for over 16 years.”

He said that if talks to transfer funds – including the top performing Somerset Asia Income Fund and Somerset Emerging Market Dividend Growth Fund – were agreed, “this will ensure the seamless continuity of these funds and their managers, while positioning them for continued growth”.

He added: “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.”