Fund founded by Rees-Mogg sets up post-Brexit vehicle in Dublin
The fund management company where Jacob Rees-Mogg is a partner has set up a fund in Dublin, as asset managers worry about being cut off from European investors after Brexit.
Mr Rees-Mogg, the Conservative MP and firm Brexit supporter, has long argued that the UK will be better off outside the EU.
But Somerset Capital Management, the investment house he co-founded, received approval from the Irish regulator in March for a version of its £1.4bn Somerset Emerging Markets Dividend Growth fund. The news was first reported in Private Eye.
Mr Rees-Mogg is a shareholder of the company, but does not make investment decisions.
“A number of existing and prospective clients requested Irish domiciled access to Somerset’s products. The decision to launch the Fund was nothing whatsoever to do with Brexit,” said Oliver Crawley, a partner at Somerset.
Several British asset managers have recently set up operations in Dublin or Luxembourg, Europe’s largest fund centres, as they prepare to serve European investors after Brexit.
Legal & General Investment Management, the UK’s largest asset manager with £1tn, recently opened an office in Dublin and received approval from the Central Bank of Ireland, the regulator, to launch a range of funds for EU clients.
Meanwhile, Columbia Threadneedle, the £362bn fund group, and M&G, which manages £351bn, both announced plans to transfer money managed in the UK on behalf of EU clients into funds domiciled in Luxembourg.
The route Somerset has taken, setting up an Irish collective asset management vehicle, or Icav, was made possible by Irish regulators in 2015 to allow fund companies to set up legal structures in Ireland that outsource the management of the funds to professionals in other countries, typically the UK.
The Somerset Icav “feeds” into the master or main version of the fund, which is based in the UK. Well known investors such as Neil Woodford have also taken this route, along with LGIM, Axa Investment Managers, Fidelity, JPMorgan and M&G.
Within its prospectus, Somerset warned its Irish fund could face challenges because of the UK’s withdrawal from the EU, warning of “considerable uncertainty” in the period before and after Brexit.
“The impact of such events on a fund is difficult to predict but there may be detrimental implications for the value of certain of the fund’s investments, or its ability to enter into transactions or to value or realise such investments,” the prospectus adds.
It also warned that the Irish fund might need to be restructured in the event that the UK leaves the EU without an agreement on its relationship with the union.
Somerset, which was founded in 2007 as an emerging markets specialist, runs a total of £7.2bn split across seven strategies.
The emerging markets dividend growth fund is down 3.6 per cent this year, compared with a negative return of 2.7 per cent for its benchmark index. Over five years it is up 43.6 per cent compared with 48.8 per cent for the index.
