It is my great pleasure to join you all today at the Family Office Symposium of the Asian Financial Forum, a flagship event demonstrating Hong Kong’s leadership as an international financial centre and a family office hub. I am delighted to see many renowned speakers and veterans of the industry joining together at today’s symposium to discuss what Hong Kong has to offer in supporting family office business. As all of you know, in terms of why and how you pick a property, location counts. It is all about location. It is similar for family offices, location counts.
Indeed, location counts when ultra-high net worth (UHNW) individuals look for a friendly jurisdiction to protect their wealth and legacies, and Hong Kong definitely ticks all the boxes for their diversified needs. Our unmatched connectivity, vibrant market opportunities and facilitative business environment are operating under the support from the Central People’s Government; our long-standing commitments and policy initiatives as the buttress for the financial services industry to scale new heights, and all these are actually similar to properties that are built to last. That is why this symposium cannot be more timely, in terms of demonstrating why Hong Kong matters and why Hong Kong is relevant in terms of the location for family offices, and what we have to offer in terms of building family offices to last.
Notwithstanding the COVID-19 pandemic during past few years, the regional – particularly Chinese – pool of wealth has continued to expand, creating more demand for sophisticated asset and wealth management services. The industry estimated that UHNW population in the Mainland rose by 2.3% over the first half of 2022. Hong Kong was the world’s premier ultra-high net worth city during that period, having extended its lead over second-place New York.
Attributing to this trend, family office business represents a fast-growing segment in the asset and wealth management industry and plays a vital role in the ecosystem to provide comprehensive financial, investment, and advisory services for affluent individuals and the family concerned.
Hong Kong is well positioned to attract family offices to operate and grow in the region. As a well-recognised premier international financial centre and wealth management centre, we have a comprehensive financial services platform and a robust regulatory framework. Despite short-term market volatility, our stock market remains vibrant, active, highly liquid, efficient and transparent, attracting investors from all over the world.
And that advantage is underpinned by the tremendous opportunities opened up by the National 14th Five-Year Plan, which supports Hong Kong to strengthen our position as an international asset management centre. Stemming from the “one country, two systems” framework, Hong Kong’s unique role as a bridge, allowing international investors to access the Mainland market, and Mainland funds to flow out to the international market, will be all the more significant.
Indeed, since the launch of the Cross-boundary Wealth Management Connect Scheme in the Guangdong-Hong Kong-Macao Greater Bay Area in 2021, Hong Kong’s position as a cross-boundary financial hub has been more significant than ever. As of November 30, 2022, over 39,000 individual investors have already participated in Wealth Management Connect and over 15,000 remittances had been recorded. Cross-boundary fund remittances totalled over RMB1.9 billion.
Meanwhile, Hong Kong’s asset and wealth management sector has been stronger than ever. At the end of 2021, we had over US$4.5 trillion in assets under management, which rose by 2% compared to 2020, with 65% of that sourced from foreign investors. That speaks clearly of our thriving international connectivity and our attractiveness for international investors, family offices included, to manage their portfolios here.
We are boosting our status as an international asset and wealth management hub. To sharpen our attractiveness, the Government has enhanced the fund structure available, provided various tax incentives, put in place a fund re-domiciliation regime, broadened our fund distribution network as well as offering a range of other financial incentives for the fund industry.
On the family office front, we have also been stepping up our efforts to create a facilitating environment for family offices through the concerted efforts of our regulators and market players. They include providing clarity on the licensing obligations of family offices as well as establishing a dedicated team under Invest Hong Kong to provide one-stop services for family offices interested in setting up a presence here. What you could look to the team is a bespoke one-stop solution in planning, managing and expanding your family offices in Hong Kong, and that will include inter-agency co-ordination with government departments and regulators.
When family offices decide where to set up their operations and locate their investments, tax treatment is often a key factor influencing their decisions. As the Government’s ongoing commitment to facilitate family office setups in Hong Kong, we have just introduced an amendment bill into the Legislative Council (LegCo) last month to provide tax concessions for eligible family-owned investment holding vehicles (FIHVs) managed by single family offices in Hong Kong. Subject to LegCo’s scrutiny, the tax concession is expected to come into effect benefitting the 2022-23 year of assessment.
The profits tax exemption for FIHVs’ qualifying transactions proposed by the Government in the amendment bill will bring Hong Kong’s tax treatment for FIHVs on a par with, if not better than, other jurisdictions because I am sure many of you are concerned about how competitive we are as we do all these. We are also happy to see that the tax proposal received wide industry support. Coupled with the depth and breadth of investment choices available and Hong Kong’s unique access to investment opportunities in the Mainland market and the tax concession proposal will augment Hong Kong’s competitiveness in attracting family offices to establish or expand their operations in Hong Kong.
From a macro, policy-level perspective, we are hoping to see family offices create more high-quality job opportunities for our talent, and bring more investments into innovation and technology startups, venture capital as well as private philanthropy. This will bring real benefits to our economy and most importantly society at large, by bridging capital markets and the real economy.
Meanwhile, in recognition of the importance of talent to the sustainable growth of the sector, we have implemented the Pilot Programme to Enhance Talent Training for the Asset & Wealth Management Sector since 2016. Family office operations are among the many themes on which asset managers can advance their professional knowledge with government subsidies.
And starting from 2018, we have facilitated fund management professionals from all around the world to call Hong Kong home under the Talent List of Hong Kong. We also welcome compliance professionals in asset management to gain admission to Hong Kong through our Quality Migrant Admission Scheme to further deepen our talent pool. As announced in the 2022 Policy Address, the Government will continue to put forth proactive measures to attract and retain talent from around the globe.
Please also rest assured that the Government will continue to listen to the views of the industry and devise timely policies to facilitate the sustainable development of the sector. We have set up a task force comprising the Government, regulators and market players such as the Financial Services Development Council to steer and oversee the implementation of the overall family office strategy. I am confident that, with our multi-pronged approach in creating a facilitating business environment for this sector, Hong Kong will continue to flourish as a leading financial centre and family office hub in the region.
Secretary for Financial Services & the Treasury Christopher Hui gave these remarks at the Family Office Symposium of the Asian Financial Forum on January 12.