Unlocking further growth: KPMG and HKIFA report identifies emerging opportunities for Hong Kong's fund management industry

Chinese Mainland market remains key and the biggest growth driver while demographic change and evolving investment landscape provide new...

Chinese Mainland market remains key and the biggest growth driver while demographic...

24 June 2024, Hong Kong (SAR), China (“Hong Kong”) – While Hong Kong’s role as the major hub for asset management in Asia remains secure, there is scope for further enhancement of cross-border schemes and tax incentives to facilitate the sector’s continued growth, according to the new report from KPMG and Hong Kong Investment Funds Association (HKIFA).

The report, Vision 2030: The future of Hong Kong’s fund management industry, is based on a series of in-depth interviews with senior industry executives, including representatives from the Financial Services and the Treasury Bureau (FSTB) and the Securities and Futures Commission (SFC), as well as a survey of HKIFA members.

Many of the CEOs interviewed for the report were strongly of the view that the Chinese Mainland market will continue to be the biggest growth driver for Hong Kong’s asset managers as the growing numbers of high-net-worth individuals (HNWI) and middle-class population are expected to drive the demand for investment products. Given Hong Kong’s longstanding experience in managing assets and its innovative investment products, the city is ideally positioned to serve the needs of this huge and growing market.

Hong Kong’s asset managers welcome the series of supportive measures designed to provide greater access to the Chinese Mainland market, such as the Wealth Management Connect (WMC) and Mutual Recognition of Funds (MRF) scheme. However, there is a broad consensus that these initiatives could be expanded further to enable Hong Kong’s asset managers to better serve this market.

Vivian Chui

Vivian Chui, Head of Securities and Asset Management, Hong Kong, KPMG China, says:

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Hong Kong’s role as the major hub for asset management in Asia remains secure, although there is much that can be done to enhance the city’s status and ensure that Hong Kong continues to attract funds, business and talent. Hong Kong’s connectivity with the Chinese Mainland is our unique advantage, and we hope to see further enhancement of the current cross-border schemes and broader access to the Mainland market.

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The Hong Kong government has been actively promoting the city as an asset management hub with the support of the Chinese Government, including through a number of targeted policies to encourage growth.

Elisa Ng, Chairman, Hong Kong Investment Funds Association, says:

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To reinforce Hong Kong's position as a global financial hub, the China Securities Regulatory Commission (CSRC) has recently announced five measures, with three specifically aimed at bolstering the asset management industry. We believe these initiatives serve as a testament to the regulators’ commitment to fostering greater connectivity and integration between the Mainland and Hong Kong markets in the long term.

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While the Chinese Mainland is likely to remain the most significant market, there are also many other areas of emerging opportunities. Across the Asia Pacific, a growing middle class and more sophisticated investor base is driving increasing demand for investment products. In addition, the shifting demographics across the region will require solutions to the retirement needs of an ageing population.

While the opportunities are considerable, Hong Kong must remain best-in-class in its regulatory regime and tax incentives so to retain its status as Asia’s leading asset management hub. This will ensure that Hong Kong continues to be the preferred hub for setting up an asset management business and that the city can continue to position itself as the preferred jurisdiction to manage assets in the region.

Another trend highlighted in the report is the ‘democratisation’ of investments, with more asset classes becoming available to retail investors and a growing interest in alternative assets. Many fund managers have already responded to the shift in demand with offerings in areas including private equity, private debt, infrastructure and real estate. 

Darren Bowdern

Darren Bowdern, Head of Asset Management Tax, KPMG ASPAC and Head of Alternative Investments, Hong Kong, KPMG China, says:

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Given the increasing focus on alternative investment products, Hong Kong needs to ensure that it is positioned to be the choice location of where to establish management operations for alternative assets. The government has been listening to the industry and we do expect that further enhancements to the tax and regulatory environment will be made.

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Virtual assets continue to garner interests among investors, with options including virtual asset ETFs are becoming more widely available. Recent regulatory developments have helped to make Hong Kong a more competitive place for fund managers that are keen to embrace these emerging asset classes.

Asset managers have been dealing with an uncertain global environment in recent years, however, interviewees were generally optimistic about the future. As they look ahead to 2030, asset managers are confident that ongoing cooperation with the governments and regulators on both sides of the border will continue to enhance the environment for the sector in Hong Kong.

Sam Yu, Vice Chairman, Hong Kong Investment Funds Association, says:

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The regulators in Hong Kong are actively engaging with the asset management sector and facilitating the sharing of industry insights with the Chinese Mainland and international authorities. We are optimistic about the potential for regulatory advancements that will enhance the already thriving business environment. Locally, Hong Kong is witnessing the emergence of opportunities driven by factors such as its growing retirement needs, a bigger and more diverse client base, and the increasing availability of a wide array of assets.

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