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Explosive Growth For Hong Kong Asset Managers

by Mary Swire, Lowtax.net, Hong Kong
10 July, 2014

The annual Fund Management Activities Survey (FMAS) released by the Securities and Futures Commission (SFC) has shown that the combined fund management business in Hong Kong hit another record high of just over HKD16 trillion (USD2.06 trillion) as at the end of 2013, representing year-on-year growth of 27.2 percent.

Hong Kong continued to be a preferred platform for international investors to invest in Asia in 2013. Contributions from overseas investors reached a historic high of HKD11.4 trillion – 72 percent of the total fund management business.

"The record high assets under management (AUM) of our combined fund management business at the end of 2013 ranks us among the top asset management hubs in Asia. Significant inflows of overseas capital underscore the value and attractiveness of our open markets and our role as an international asset management center," noted Alexa Lam, the SFC's Deputy Chief Executive Officer and Executive Director of Investment Products, International and China.

"Hong Kong's fund industry is trending up the value chain with more market professionals engaging in the high value end of the business. Hong Kong's strength in product innovation and in particular our lead in renminbi product development are a key driver behind the growth of its fund management business," she added.

Amongst the performance breakdown between different market players, licensed asset management and fund advisory corporations continued to contribute the largest proportion of the combined asset management business. Their aggregate asset management and fund advisory businesses amounted to almost HKD11.8 trillion at the end of 2013, up 28.4 percent from end-2012.

In addition, while registered financial institutions recorded a 27.8 percent increase in their aggregate asset management and other private banking businesses, to HKD3.7 trillion by at end-2013, insurance companies were only able to report a 1.7 percent increase in their assets under management to HKD364bn.

Of the non-real estate investment trust (REIT) asset management business, which increased by 38.5 percent to HKD11.4 trillion in 2013, more than HKD5.8 trillion (or 51 percent) was managed in Hong Kong, and 74.6 percent of these assets managed in Hong Kong were invested in Asia.

By the end of 2013, the number of companies licensed for asset management had grown by 6.5 percent to 950 firms, from 892 a year ago. The number had increased further to 967 as at end-March 2014, surpassing all the other types of licensees, including securities dealing, which was the regulated activity which traditionally had the largest number of firms licensed.

The FMAS report also confirmed that Hong Kong is committed to maintain its lead as the primary center for the creation and development of offshore RMB assets, products and services, which have developed rapidly with the Mainland Government's policy support. At the same time, as the number of Mainland-related financial institutions establishing operations in Hong Kong has continued to increase, they have brought new opportunities to the Hong Kong market.

Hong Kong, the report stated, has continued "to attract asset management talents which have underpinned the city's success as an asset management hub. 2013 saw a notable shift within the financial talent pool in Hong Kong's fund management business away from sales and marketing and into the high-value end of the business such as portfolio management, research, and dealing."

Furthermore, the report also confirmed that the SFC has continued in its efforts to facilitate market development and safeguard investor interests through launching various facilitative measures and regulatory initiatives. The SFC is also committed to investor education and the ongoing monitoring of investment products.

"The SFC will continue to follow through with the Mainland regulatory authorities on arrangements in relation to the mutual recognition of funds between Hong Kong and the Mainland. This initiative will help promote Hong Kong domiciled funds," Lam continued. "Increased AUM will further develop the ancillary professional service sectors engaged in the product development, investment management, and distribution of sales of funds."

The FMAS has been conducted annually since 1999 to help the SFC assess the industry's state of affairs for policy setting and operations planning. This year, a total of 555 institutions responded to the survey on a voluntary basis. They included 488 licensed asset management and fund advisory corporations, 47 registered financial institutions, and 20 insurance companies.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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