Dominic Johnson, chief executive of boutique asset manager Somerset, expects sector to thrive after Brexit

William Turvill
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Dominic Johnson founded Somerset Capital alongside Jacob Rees-Mogg (Source: Somerset Asset Management)

Business leaders often say they welcome healthy competition. But the suspicion is, in many industries and sectors, they would probably welcome fewer and weaker competitors.

Dominic Johnson is one boss who you should take at his word. He would like to see the number of independent asset management firms in the UK grow, and feels that Brexit can enable the sector to thrive.

The chief executive of boutique asset manager Somerset Capital Management, a firm he founded alongside Conservative MP Jacob Rees Mogg in 2007, Johnson has spent the last seven years speaking out for the interests of his peers.

In addition to leading Somerset, which is an employee-owned fund specialising in emerging markets, Johnson has also led the New City Initiative (NCI) think tank, which lobbies on financial regulation on behalf of independent, owner-managed firms in the sector.

After serving as chairman since 2014, Johnson stood down earlier this month to be replaced by Jamie Carter, the chief executive of value investor Oldfield Partners.

The NCI has around 50 members, who between them manage around £400bn of assets. Johnson would like to see this number swell.

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Boutiques thrive on competition

“You would have thought [competition] isn’t in our interest, but it is,” he says. “It really is. We’re boutiques and so we thrive on a culture of other boutiques.

“We had a client in this morning. They come to London because they can see us, they can see five other boutiques, they can fly out. If it was just us on our own, if there were no other boutiques, we wouldn’t be here. So we thrive off other people thriving.”

Johnson, unlike his colleague Rees-Mogg, did not campaign for Brexit last summer.

But he also strongly believes the result of the EU referendum presents his sector with an opportunity to grow.

“For financial services, I’m not sure how big a difference it will be when it comes to accessing the European markets,” he says.“It was still complicated [before], you still had to get locally regulated, you still had to make sure you conformed to all local marketing and distribution rules.

“So, to be honest, we’re not as concerned about Brexit as many other industries.”

But he adds that the sector’s prospects could be scuppered if other European nations set out to punish the UK. “The most important one for us is distribution,” Johnson says. “Will we have to have a physical presence in Europe to distribute our products? If we don’t then registering funds in Europe is perfectly acceptable – we do that where we market everywhere else in the world, be it Singapore, be it the US, be it Australia: we do that already.

“But having to have a physical presence on the ground I think would be very problematic for the NCI members. Having said that, I would have thought it unlikely in the sense that we do a lot of business in America, we don’t have a physical presence on the ground in the US.

“And nor do American companies marketing into Europe have to have a physical presence. So it would be very unusual to try and place this extra burden on us.”

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Passives too aggressive for big players

Johnson, a Durham University graduate who previously worked for Robert Flemings and Lloyd George Management, believes the future is bright for Somerset and its peers. Unlike the UK’s larger asset management groups, who he believes, under pressure from the rise in popularity of passive funds, have some tough times ahead.

“I think the next 10 years for asset management is going to be hugely evolutionary. Read: creative destruction,” he says.

“You’re either going to be a vast passive provider, or you’re going to be a specialist boutique...

“I genuinely believe only those types of organisations can provide the sorts of specialist, less liquid, more active products that the audience will seek when they are discussing active management.”

He adds: “I’m hoping that for the NCI and our member firms that actually our best days lie ahead. And post-Brexit London could just totally dominate that sector globally.”

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