Economic initiatives, financial infrastructure, and a growing stock exchange make Hong Kong particularly attractive to alternative fund managers.
Alternative assets are growing faster in Asia Pacific than anywhere else in the world, with the asset class expected to grow to $6 trillion in APAC by 2025[1]. According to the Alternative Investment Management Association, Hong Kong is particularly attractive to alternative fund managers serving institutional investors and high net worth individuals and families. We examine three key reasons Hong Kong continues to attract new funds—its strategic economic initiatives, world class financial infrastructure, and fast-growing stock exchange.
GBA initiatives solidify Hong Kong as a financial hub
China’s Greater Bay Area (GBA) development is a strategic and innovative economic initiative to integrate Hong Kong with Macau and nine major cities in the Guangdong province and harness their collective strengths. It’s a key component of the country’s and region’s economic future. Each GBA city has a sector-specific role to play to enhance its own unique strengths and attract investment. Four zones were created to drive additional possibilities for development. For example, the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone established a development model featuring market connectivity with Hong Kong and Macau that became an international trade center.
The GBA’s infrastructure projects like bridges and rail support travel and communication between the cities and have tightened bonds across the regions. In addition, the GBA also sets rules to create a better environment for the flow of public services, logistics, capital, and information[2]. Building on its status as an international financial center with a professional talent pool, Hong Kong is solidifying its standing as the GBA’s primary finance and legal arbitration hub.
A global financial center fueled by local talent pool
Hong Kong has a world class financial infrastructure and a long tradition as one of the world’s major international trading centers. The Hong Kong Monetary Authority (HKMA) regulates financial institutions, conducts monetary policy operations, and manages the Exchange Fund—all essential to maintaining the stability and integrity of the monetary and financial systems. Years of applied effort and resources have resulted in a robust multi-currency platform that includes extensive links with domestic and overseas systems designed for cross-border and domestic transactions.
Many Hong Kong alternative investment managers outsource fund administration locally. It’s easier to ensure compliance with evolving regulations and makes the fund more efficient and cost effective to run. Since most managers want to invest in mainland China, they find it invaluable to have a capable and reliable partner on the ground to support their administrative activities and maneuver through differing tax and legal systems. Partnering with Chinese-speaking professionals with an understanding of local practices adds layers of efficiency to the process.
Hong Kong’s growing stock exchange
The growing popularity of the Hong Kong Stock Exchange (HKG) and its thriving IPO market are attracting new alternative fund managers to the jurisdiction. HKG’s reputation as a premier venue for high-profile IPOs, particularly from Mainland China, enhances its appeal, offering fund managers a vibrant, liquid market with numerous opportunities. The Stock Connect programs linking HKG with Shanghai and Shenzhen exchanges provide unparalleled access to Mainland China’s vast capital markets, making Hong Kong an attractive gateway for international investors.
Additionally, HKG’s efficient and transparent listing processes, coupled with its strategic location in Asia, provide private fund managers with access to a diverse and dynamic liquidity option for portfolio companies. Tax incentives and favorable regulations further bolster Hong Kong’s attractiveness.
Additional considerations for launching a Hong Kong fund
In addition to Hong Kong’s economic initiatives, financial infrastructure, and growing stock exchange, there are many other reasons to consider domiciling funds there. Hong Kong’s proximity to China and concise range of easy-to-understand fund structures are reasons for investors to feel reassured about its long-term growth potential. Developing a partnership with a high-quality service provider that can offer the benefits of an international network can smooth the way to success in this attractive and complex market.
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