HONG KONG - Hong Kong’s fund management industry is being urged to boost technology investment and integration of environmental, social and governance (ESG) principles so it stays competitive over the next five years.
These are among the key conclusions of new survey ‘‘Vision 2025” jointly authored by global business advisory firm KPMG China and Hong Kong Investment Funds Association (HKIFA). It interviewed more than 20 senior executives in the fund management industry from November 2019 until January 2020. This publication follows on from the inaugural report “Vision 2020” published in 2015.
According to the survey, 79 percent of respondents expect their investment in technology to increase over the next 12 months. A greater proportion of technology investment by firms is expected to be allocated towards data and client-facing technology, the survey found.
Experts predict new technology investment over the next five years will shift away from middle-office technology and back-office technology emphasizing information technology systems in fund management and transactions
Vivian Chui, KPMG China’s partner and Hong Kong head of securities and asset management, said new investment in technology would cover many areas. “Such as automation, artificial intelligence, cloud computing, robo-advisory and digital wealth management platforms,” she said.
HKIFA Chairman Bruno Lee told China Daily the younger generation also had a key role to play. “When fund managers are leveraging technology, they can cater to the financial planning needs of those younger, but digitally-savvy investors, thus helping the fund management industry to tap into the younger population segment as a new customer base.”
Experts predict new technology investment over the next five years will shift away from middle-office technology and back-office technology emphasizing information technology systems in fund management and transactions. It is expected to move toward technologies such as cloud services and artificial intelligence aimed at enhancing the customer experience.
ESG integration in the fund investment process is also becoming a growing concern for international fund managers based in Hong Kong. The KPMG China-HKIFA survey said 89 percent of respondents agree that providing sustainable investment-related products is increasingly important to clients. With pension funds and institutional investors continuing to raise the bar for ESG, greater collaboration between industry stakeholders is needed to create clearer ESG standards for Hong Kong.
Lee said talks were now underway on the best ways to do this. “Fund managers in Hong Kong are holding discussions with local and overseas financial industry regulators, and other stakeholders. They are discussing how to harmonize different ESG investment standards so fund managers can consistently apply the new harmonized standards to make ESG investments in the future,” he added.
The local fund management industry is also being urged to boost retail fund investors’ knowledge of ESG principles. The industry should also train more ESG investment specialists so investment managers can invest in companies which have good records in complying with ESG standards, Lee said.
According to the Global Sustainable Investment Alliance, the value of international assets under management (AUM) of ESG investments increased from close to $23 trillion (HK$178.2 trillion) in 2016 to $30.7 billion in 2018.
