Hong Kong Becoming an Important Fund Management Centre

Hong Kong’s Financial Secretary, Mr Henry Tang, painted a rosy picture of the burgeoning fund management industry in Hong Kong when he addressed the Hedge Funds World Asia 2003 conference in early December. 

Fund management in Hong Kong is expanding, said Mr Tang, “with a potential that has yet to see limits.” In spite of relatively sluggish market conditions, the total assets managed in Hong Kong continued to rise steadily in the last few years, and in 2002 by almost 11%. And the number of companies that provide fund management or advisory services has increased by 12% from 2001 to 2002. “All these suggest that Hong Kong is becoming more and more important as a fund management centre,” said Mr Tang.

The retail investment funds offered in Hong Kong have also steadily expanded, in terms of product types and complexity.  At the end of October 2003, among the 1,911 SFC authorised unit trusts and mutual funds, alternative investment products such as structured products and hedge funds accounted for nearly 14% of the total.

Mr Tang pointed out that Hong Kong’s successful fund management sector is built on an excellent market infrastructure which is fund management business friendly and attracts talent and capital to the territory.

According to Mr Tang, financial services employ 5% of Hong Kong’s workforce, but adds the highest value by contributing 12% of GDP. “ The Government, therefore attaches high priority to developing this sector,” he said, including initiatives to promote market liquidity and the development of asset management.

At the same time, Mr Tang said: “The Hong Kong Special Administrative Region Government is concerned about the need to protect investors’ interests, given that hedge fund products are increasingly being marketed to retail investors.” Bringing hedge funds under a proper regulatory and disclosure framework for such sales would illustrate to the industry that these funds can be made more transparent without undermining the effectiveness of their investment strategies. 

Mr Tang also discussed the implications of the recently signed Closer Economic Partnership Arrangement (CEPA), which provides for market liberalisation commitments towards Hong Kong ahead of and beyond the Mainland’s WTO commitments.

He concluded: “Hong Kong’s fund management industry has enormous potential to grow much further and we will continue to co-ordinate new initiatives to promote the development of Hong Kong’s financial markets, including in the area of asset management.”

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