Emerging markets specialist Somerset Capital, which runs around $5bn, is reportedly up for sale, with a management buyout or merger potentially on the cards.
Chief executive Dominic Johnson is exploring options to sell the firm amid plans to step down and move into politics, according to the FT.
Reports state that former Conservative Party vice-chair Johnson, who set up Somerset with Business Secretary Jacob Rees-Mogg 15 years ago, will be replaced by current chief operating officer Robert Diggle.
Expect further M&A acceleration in wealth management
This comes after the boutique fund manager hired advisers from Spencer House earlier this year to "help manage capital structure".
Johnson told the FT that the firm's aim has always been to be an independent, employee-owned boutique but there are a number of partners who are no longer active in the business.
Upon Johnson's departure, around half of the business's equity will be held by retired partners, including Rees-Mogg.
Various options are on the table including a management buyout or merger with another asset manager.
Emso Asset Management, which also specialises in emerging markets, is reportedly one of the potential buyers, though terms of any deal have not been finalised. Emso AM holds just under $6bn of assets under management.
Somerset's own value has suffered in recent years after enduring poor performance and falling profits thanks to a sell-off in emerging markets and a general global market downturn.
According to its latest accounts, the firm's profits plummeted by 34% to £9.7m during the 12 months to March 2021, while turnover slumped by 20%.
UK M&A falls as Russia-Ukraine depresses sentiment
The company said that it expected profits to decline still further in the coming year as a result of increased investor caution following the coronavirus pandemic, as well as a fall in AUM and fees.
Year-to-date, the MSCI Emerging Markets index has fallen by 7.4%, according to data from FE fundinfo.
