Hong Kong’s asset and wealth management business continued to flourish in 2020, with a 21% year-on-year growth in asset under management to HK$34,931 billion (approximately US$4,505 billion), according to the Asset and Wealth Management Activities Survey 2020 issued by the SFC.
According to the Financial Services and Treasury Bureau of Hong Kong, the asset and wealth management business of Hong Kong amounted to around $28.8 trillion (US$3.7 trillion) as at end-2019, with 64% of the fund (excluding the business of SFC-authorised real estate investment trusts and assets held under trusts attributable to non-licensed corporations or non-registered institutions) sourced from non-Hong Kong investors.
The Wealth Management Connect scheme will benefit asset managers, as well as banks and other financial institutions.
Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area
Cross-border offerings of eligible Hong Kong public funds to the Mainland and other overseas markets are actively promoted through the arrangements of mutual recognition by the SFC ("MRF"). This facilitates the expansion of the investor base for Hong Kong public funds, diversifies the choices of fund products offered, promotes Hong Kong as a competitive global asset and wealth management centre and encourages the development of local investment expertise.
Over the past decade, the SFC has entered into 10 memoranda of understanding on MRF with different regulators of the asset and portfolio management internationally. Taking the most recent new addition of MRF, Thailand, as an example, the MRF with Thai Securities and Exchange Commission allows the eligible Hong Kong and Thai funds to be offered in the reciprocal markets with an expedited and streamlined approval process and disclosure requirements.
The list of the countries/regions that SFC has entered into MRF includes (as of the date of writing): Australia, France, Luxembourg, Mainland China, Malaysia, Netherlands, Switzerland, Taiwan, Thailand, and the United Kingdom.
New options have been introduced in the last few years to make Hong Kong a more attractive centre to originate funds. For example, a legal framework for new fund structures in the form of open-ended fund companies (“OFC”) in Hong Kong since July 2018, and in August 2020, the limited partnership fund (“LPF”) regime will enable funds to be constituted in the form of limited partnerships. These companies/funds will enjoy some tax exemptions.
InvestHK, a government department responsible for foreign direct investment, has a dedicated team to offer one-stop support services to family offices which are interested in establishing in Hong Kong.
ESG-related funds, including carbon-themed funds, is likely to be a growth area.