With more than HK$35 trillion in assets under management, and home to the biggest concentration of investment professionals in the region, Hong Kong has long been seen as Asia’s leading asset management hub.
With Hong Kong now fully reopened for business, there are plenty of reasons for optimism in 2023 as the city expects a post-pandemic economic turnaround. However, the city’s status as an asset management hub is not unassailable, and some concerns have emerged amid the disruption of recent years.
The attributes that have made Hong Kong a global financial centre and Asia’s leading asset management hub remain. These include Hong Kong’s longstanding favourable tax and regulatory environment, its access to a deep talent pool, and role as a gateway for capital flows to and from the Chinese Mainland. Nevertheless, the city has lost some ground to other jurisdictions over the last few years. Pandemic-related restrictions that continued throughout 2022 made it difficult for Hong Kong’s industry professionals to host or attend meetings and industry events. The cautious approach to reopening may have affected Hong Kong’s reputation as a cosmopolitan and open city, but with Covid restrictions now all dropped the city has resumed normal business activity.
However, for the alternative assets sector, Hong Kong needs to take further steps to become a more attractive location of choice, including in the areas of tax and the overall regulatory environment. For example, Hong Kong recently introduced tax incentives to support the funds industry but there remains some uncertainty over how these apply in practice. Some application procedures are onerous and some licensing procedures are too complicated. The resulting uncertainty and complexity are discouraging asset managers from otherwise choosing Hong Kong as a fund domicile or investment platform location.
We believe that these issues can be remedied by some important reforms to the tax regimes and a more accommodating licensing regime.
In this report, we present our review of the current landscape for alternative assets in Hong Kong, and our suggestions for ways that the city can reinforce its foundations and prepare for the future, to ensure that Hong Kong regains its status as the premier hub for alternative assets in Asia.
Partner, Tax, Head of Alternative Investments, Hong Kong, KPMG
贝元生 // Michael Bugel
Managing Director, Co-Head of APAC, AIMA
李可胜 // Kher Sheng Lee
Managing Director, Co-Head of APAC and Deputy Global Head of Government Affairs, AIMA