Somerset Capital Management has seen its profits slashed by a fifth after reporting shrinking revenues for the second year in a row but co-founder Jacob Rees-Mogg is still set to walk away with £800,000.
Operating profit at the firm plunged to £20.8m in the year ended 31 March 2020, down 20% from the £26.2m raked in over 2019, a filing from Companies House revealed.
Weaker profits during the year were the result of falling revenue in March as the coronavirus wiped trillions of dollars off global stock markets. Year-on-year turnover fell 12.3% from £38.8m in 2019 to £34.0m in 2020.
Jacob Rees-Mogg entitled to another massive payout
But Somerset co-founder Rees-Mogg (pictured) is still entitled to a generous £800,000 payout, according to The Times.
This is slightly less than the £1m payout he pocketed last June, a month before he announced he was stepping back from his part-time role at the investment manager to become leader of the House of Commons.
Despite his resignation, Rees-Mogg still owns 14% of shares in the emerging markets boutique, which are held in a blind trust.
Somerset’s members collectively took home £14.9m for the year, a quarter less than the £19.5m they were awarded in 2019 which itself was lower than 2018’s £25.3m payout.
The highest paid member scooped up £1.3m in 2020.
Documents from Companies House shows headcount at the business increased by two to 23 staffers during the period with the number of corporate members remaining consistent at six.
Members brace for further hit to profits as investors shun EM
In the annual report members said they anticipated a further hit to profits in the forthcoming year amid the ongoing Covid-19 pandemic.
Stock market valuations are likely to remain depressed and could fall further before a rebound, they noted in the report, and the virus crisis continues to have a negative impact on investor appetite for riskier asset classes like emerging markets.
The restrictions imposed by governments in wake of the crisis would make it more difficult for Somerset to market its services and raise new assets, they added.
Despite this the members said they remained “confident” Somerset would remain profitable and said its funds were well-positioned for a recovery in markets.
At the end of March Somerset EM Discovery Fund manager Mark Asquith hyped a “once in a generation opportunity for super normal returns” in emerging markets after the fallout from Covid, in a rare press release issued by the firm.
Asquith said the asset class could enjoy a similar bounce back as it did in the aftermath of the global financial crisis, where Brazilian small caps rose 300% 12 months from the lows of November 2008.
