Somerset Capital has seen its profits plunge by over a third as the coronavirus pandemic continues to weigh on the emerging market boutique’s revenues.
Operating profit for the year ended 31 March 2021 came in at £13.5m, 35% lower than the £20.7m brought in the year before, according to filings from Companies House.
Weaker profits were driven by lower management and performance fees, as well as a small increase in costs due to staff hires during the period.
Revenues at the emerging markets boutique had been shrinking since 2019 but this has been exacerbated by the fallout from the coronavirus pandemic.
Over the last financial year, turnover, which is generated from investment management fees, plunged by 18.8% to £27.7m from £34m a year ago. This was steeper than last year’s 12.3% drop.
Jacob Rees-Mogg sees payout fall 25%
Despite the squeeze on profits, Somerset co-founder Jacob Rees-Mogg (pictured) is thought to have walked away with dividends totalling £600,000 for the year, according to The Times.
This is considerably less than the generous £800,000 payout he scooped up in 2020 and the £1m he pocketed in 2019, before he announced he was stepping back from his part-time role at the investment manager to become leader of the House of Commons.
While Rees-Mogg no longer has direct ties with Somerset, he remains a sleeping shareholder. Last year he held a 14% stake in the company via a blind trust, but he has pledged to reduce this by offloading shares to new partners, The Times said.
Somerset’s members, including CEO Dominic Johnson and fund manager Edward Robertson, split £9.7m worth of profits between them in 2021, down from £14.9m in 2020.
See also: Somerset Capital sees profits slashed by a fifth as revenues shrink from Covid hit
Covid pandemic continues to create problems for raising new assets
For the second year in a row members warned they expect profits to slump further in the current year as the pandemic weighs on investor sentiment for riskier assets like emerging market equities, making it trickier for Somerset to market its strategies and raise new assets.
However, they “remain confident” the group will continue to be profitable in part thanks to its new strategies launched in H2 2020, including the Somerset Emerging Markets Future Leaders Ucits.
“Emerging Markets and Asia always have challenges and risks but that is what makes them such an exciting asset class for active managers,” said Somerset CEO and founding partner Johnson.
He added the group was “particularly optimistic” about its Asian Income Strategy which he said has continued to perform strongly since Liontrust’s Asian Income team, headed by Mark Williams, came on board last October.
In April Somerset won a £322m emerging market mandate from Omnis Investments.
Assets under management are currently $7.2bn (£5.3bn).
See also: Jupiter loses out on £322m EM mandate to Somerset Capital
