HONG KONG – The Hong Kong government unveiled its policy roadmap document in March this year to develop family office businesses in the special administrative region in eight strategic directions, including offering tax concessions and other financial incentives, nurturing talents, promoting art storage facilities, developing philanthropy and expanding business networks. The objective is to help no less than 200 family offices establish or expand their operations in Hong Kong by late 2025.
Family offices, along with mutual funds, hedge funds, private equity funds, insurance companies, pension funds as well as sovereign wealth funds, are increasingly becoming an important source of capital from institutional investors in the global financial market. It is no wonder Hong Kong wants to lure new capital from family offices to cement its status as a global private wealth management hub.
But the city should not be just being satisfied as a global wealth management center. Family offices have diverse interests in education, philanthropy, art appreciation, financial technology and virtual assets, as well as private equity businesses. It is therefore imperative for financial regulatory authorities in Hong Kong to think about developing these financial segments to cater to diverse investment needs of family offices.
The SAR certainly is quick to grasp this point. Last month, Hong Kong Monetary Authority launched the e-HKD pilot program, while the virtual asset trading platform operator regulatory regime by the Securities and Futures Commission took effect on June 1. In September last year, the SAR government and the Qianhai Authority of Shenzhen jointly promulgated 18 measures to promote Hong Kong and Shenzhen as an international venture capital cluster.
The UBS Global Family Office Report 2023 surveyed 230 single family offices worldwide with a combined net worth of almost $496 billion. Forty-five interviewed Asia-Pacific single family offices still favor hedge funds, private debts, and private equity investments in technology, healthcare, information and communications, real estate and rental leasing to diversify risks and boost long-term returns, even though they had the highest allocation for equities and developed market fixed income.
The market now expects the cross-boundary wealth management connect program between Hong Kong and the Chinese mainland to give residents in the Guangdong-Hong Kong-Macao Greater Bay Area access to global equity products. The rapid growth of industries like hi-tech, telecommunication, healthcare, life sciences and new energy in the Bay Area should provide an array of investment opportunities for family office clients. Promoting family office business will be conducive to the development of private equity fund industry in Hong Kong.
Hong Kong Private Wealth Management Association says, if Hong Kong wants to thrive as a global wealth management hub, it has to build a “renminbi offshore ecosystem” with more RMB-denominated investment channels and financial instruments, so that family office investors can have more investment options. The city should also enrich its risk management financial products so that family office investors can use these tools to hedge investment risks.
The SAR government knows very well that promoting family office businesses can spur the city’s art trade industry as family offices have capital allocation in art. Hong Kong also has the potential to develop into a philanthropic center, servicing as a base for global family offices and philanthropists to deploy charitable capital benefiting the city, the mainland and overseas.
The argument is crystal clear: developing family office businesses is not only good for the asset and wealth management industry. It can be also conducive to the development of other financial services segments that can genuinely help Hong Kong qualify as a full-fledged financial center.
Oswald Chan is a veteran business journalist and joined China Daily as a senior business news reporter in 2010. He covers various issues pertinent to the development of Hong Kong economy. He can be reached at firstname.lastname@example.org.
Copyright 1995 - 2023. All rights reserved. The content (including but not limited to text, photo, multimedia information, etc) published in this site belongs to China Daily. Without written authorization from China Daily, such content shall not be republished or used in any form.
HONG KONG NEWS