The fund management firm co-founded by former business secretary Sir Jacob Rees-Mogg is to be wound down after recently losing its largest client.

London-based Somerset Capital Management – which specialises in emerging markets – said it is in advanced discussions to transfer key UK funds, along with their investment managers, to a new investment adviser, but will be “closing its wider institutional business in London”.

Somerset has seen its assets under management plunge after its biggest client, St James’s Place, last month ended its relationship with the firm, dealing a massive blow as it withdrew a reported 2.5 billion US dollars (£2 billion) in assets.

The move is said to have unsettled remaining clients with Somerset.

Sir Jacob co-founded Somerset with Edward Robertson and Lord Dominic Johnson in 2007.

Lord Johnson was chief executive of Somerset until last year and is currently investment minister in Rishi Sunak’s Government.

Sir Jacob and Lord Johnson have retained minority stakes in the firm.

At its height five years ago, Somerset had around 10 billion US dollars (£7.9 billion) in assets under management and, not long after, is understood to have rejected a takeover approach worth up to £90 million from rival Artemis Investment Management.

But the recent client outflows have left it with a reported 1 billion US dollars (£794 million) in assets as of October.

Oliver Crawley, partner at Somerset, said: “It has been a privilege to manage capital for world-leading institutions and clients for over 16 years.”

He said that if talks to transfer funds – including the top performing Somerset Asia Income Fund and Somerset Emerging Market Dividend Growth Fund – were agreed, “this will ensure the seamless continuity of these funds and their managers, while positioning them for continued growth”.

He added: “The current teams have delivered strong performance for their investors and continue to do so.

“We hope a transition can be secured which we believe will give the funds a bright future.”