>
Star Player: What Jacob Rees-Mogg Might Look Like in a Chairman Mao Pet
The investment company founded by Commerce Secretary Jacob Rees-Mogg has millions of pounds in Russian and Chinese companies, The Mail on Sunday revealed.
The commitment of Somerset Capital Management (SCM) will raise eyebrows at a time of fraught relations between the British government and the Kremlin following Russian President Vladimir Putin’s invasion of Ukraine.
There are also increasing tensions with the communist regime in Beijing.
In his new role as Business Secretary, Rees-Mogg is responsible for sensitive statements involving Chinese and Russian interests, including whether or not to allow takeovers of British companies by Beijing-backed predators.
One of the controversial holdings is a stake in Moscow-based internet giant Yandex, often referred to as Russia’s Google and the country’s largest search engine.
According to the most recent documents filed this summer, SCM owned two million shares in Yandex, which was criticized for promoting the Kremlin line on its online news platform.
Imprisoned opposition leader Alexei Navalny has described the company as “the main propagandist” for the murderous war against Ukraine.
Western companies have faced tremendous pressure to end investment in Russia since the invasion launched on February 24.
Former Yandex chief executive Arkady Volozh resigned in June after being sanctioned by the European Union.
SCM previously held interests in four companies operating in Russia, but this has now fallen to two, documents show. The other is a recruiting company called Head-Hunter. Rees-Mogg is a co-founder of SCM, which manages approximately $5 billion (£4.5 billion) on behalf of clients, and lists himself as a partner in the company in parliamentary statements.
Earlier this month, he was promoted to Secretary of State for Business, Energy and Industrial Strategy by new Prime Minister Liz Truss.
SCM has just been put up for sale with a price tag of tens of millions of pounds, which would give Rees-Mogg a multi-million-pound windfall.
The company claims it has no say in stock selection decisions, as he withdrew from direct involvement in the management of the funds when he became an MP in 2010.
However, he acted as a part-time consultant until 2019 and received compensation of around £180,000 per year from the company for around 30 hours of work per month.
He would have an interest of between 10 and 15 percent in SCM.
The investment company already owned shares in Yandex in 2018. In March, after Putin’s invasion, it said it would exit its shareholding “in an orderly fashion in due course.”
Part of the action: Rees-Mogg’s company invests in Yum China, which owns the Pizza Hut franchise in China
But the most recent corporate documents seen by the MoS suggest it still owns the shares, which are likely to be difficult to sell due to sanctions imposed after Putin’s invasion.
Financial data firm Bloomberg estimates the par value of the shares at nearly £50 million.
However, like other Russian investments, they may in reality be worth little or nothing, due to the financial consequences of the war. SCM says it has “written down” its two million shares in Yandex to zero, implying that it does not expect to make any money from the investment.
Other controversial holdings include Yum China, the country’s largest restaurant group, one of SCM’s largest investments. It operates 12,000 restaurants in the country, including many under license, such as KFC and Pizza Hut.
The files show that Somerset Capital has a £160m stake in the company, which is chaired by senior Chinese Communist Party policy adviser Fred Hu.
Key roles: Fred Hu is chairman of Yum China
It also has a £6 million stake in a Taiwanese semiconductor factory.
The semiconductor industry is globally sensitive and has sparked a row over Newport Wafer Fab, Britain’s largest microchip maker.
Rees-Mogg now holds sway over the future of the Wales-based company, which was sold last year to a China-backed buyer. He is expected to announce his decision shortly on whether or not to cancel the deal for reasons of national security.
SCM’s shares are featured in the most recent stock market documents, including dozens in China, Hong Kong, Saudi Arabia, India and South America. Other key investments include a £90 million stake in Indian information technology company Infosys – the company founded by former Chancellor Rishi Sunak’s father-in-law.
Rees-Mogg co-founded SCM in 2007 with Dominic Johnson and Edward Robertson. The company is named after the county where Rees-Mogg grew up and is the location of his constituency.
Oliver Crawley, a partner at the firm, said: “As a global emerging markets equity specialist, Somerset Capital Management had limited exposure to listed Russian stocks before Russia invaded Ukraine.
“Since the invasion, these shares have been suspended from their exchanges and Somerset’s policy has been that it will not buy Russian securities.”
The company describes its investment goals as ’emerging markets’ – countries that promise high returns, but carry more risk than Western countries.
Rees-Mogg declined to comment.
Some links in this article may be affiliate links. If you click on it, we can earn a small commission. That helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.