Windfall for Somerset partners shrinks to £20m amid EM weakness

£850m fund has been in the spotlight for poor performance

Somerset Capital Management partners, including Jacob Rees-Mogg, collectively took home £19.5m over the summer – a fifth less than the £25.3m payout they received for the previous financial year, Companies House records show.

The lower payout comes on the back of revenues falling 14.96% from £45.7m to £38.8m in the financial year ended 31 March 2019, filed to Companies House on 15 August revealed. Operating profit fell 24.6% from £34.1m to £26.3m.

Somerset issued a press release a week before the publication of results highlighting market volatility in emerging markets and stating 80% of managers underperformed in the asset class in 2018.

Over the 12-month period to the end of March, the MSCI Emerging Markets index returned 0.05% in sterling terms compared to 11.8% returns in Somerset’s previous reporting period.

A management fee of £9.5m was paid to Somerset Capital Management Ltd the same as last year.

One additional staff member joined over the financial year taking the total to 22.

Rees-Mogg steps back

Members’ remuneration was £6.3m compared to £8.9m in 2018. The largest entitlement for a member was £1.8m compared to £2.5m last year.

The profits were allocated to members in June 2019, a month before Rees-Mogg (pictured) announced he was stepping back from his part-time role at the investment manager to become leader of the House of Commons. His exit from the investment industry was described as inconsequential due to the part-time nature of his role and his poor track record as a fund manager.

He will remain a partner in the business in which he owns a 15% stake, although it will be held via a blind trust. Fifteen per cent of the 2019 payout would have worked out at £2.9m, although the Times has previously reported as a part-time worker Rees-Mogg is set to take home around £1m instead.

He took home £173,820 from his role over the last year working 30 hours a month until June 2019, when his hours reduced, according to the register of MPs’ financial interests.

CEO Dominic Johnson and fund manager Edward Robertson, both founding partners, remain the designated members in the LLP, while Rees-Mogg becomes a non-designated member, according to a filing from June. There are 19 partners in the LLP.

Dividend Growth fund takes a hit

The results come as one of Somerset’s largest funds, Emerging Markets Dividend Growth, featured in Tilney’s Spot the Dog report, which highlights funds that consistently underperform over three consecutive years. The £858.1m fund, managed by Edward Lam, was also dropped from the FE Alpha Manager list in February.

Johnson said Lam’s fund, along with Global Emerging Markets, “went through a challenging period of performance in Q2 and Q3 2018, but have recovered strongly and are both outperforming this year”.

Somerset funds performance

6m1yr3yr5yr
MI Somerset Emerging Markets Dividend Growth7.106.1818.9241.09
MI Somerset Global Emerging Markets9.459.2726.0041.40
MI Somerset Global Emerging Markets Screened8.918.73
MSCI Emerging Markets3.072.9624.0639.06
MI Somerset Emerging Markets Small Cap3.314.8514.0041.20
MSCI Emerging Markets Small Cap1.16-4.179.7028.18
Somerset Frontier Markets B Acc GBP in GB-3.43
MSCI Frontier Emerging Markets7.897.2518.7723.01
Source: FE Analytics

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