Asia is producing billionaires with an amazing speed, wealthy Chinese are eager to invest, and with the wealth management connect scheme soon to be implemented, Hong Kong’s family office industry will be a major beneficiary, Kwan Chi-man, chairman of the Family Office Association Hong Kong (FOAHK), told a press conference on Tuesday in Hong Kong.
“The Greater Bay Area (GBA) is an economic powerhouse for China and a world-class economic zone, containing many ultra-high net worth individuals (UHNWIs),” Kwan said, estimating that by 2025 the revenue of wealth management will reach $185bn in the GBA, an economic region comprising Hong Kong, Macau and nine cities in the mainland province of Guangdong.
According to the Securities and Futures Commission’s recent “Asset and Wealth Management Activities Survey”, Hong Kong’s private wealth management AUM increased by 25% to $1.46bn, with non-residents comprising a major source of inflows.
“Hong Kong has a well-developed capital market, legal system and a huge number of UHNWI [which makes it] well positioned to be a family office hub,” said Kwan.
The Hong Kong government is also keen to boost the development of family offices, with initiatives such as Family Office HK to promote the territory as a regional hub.
However, the family office in Asia is still a relatively new concept, with wealth managed by family offices accounting for about 5% of the assets managed by private banks in the region, compared with 40% in the US and 26% in Europe. “There is huge room for the family office business to grow in this part of the world,” Kwan said.
The FOAHK was established in November 2020, and the majority of its 30 members are multi-family offices from Hong Kong. As of mid-July 2021, the combined AUM of FOAHK’s members is about $53bn.
Kwan said its target is to see its membership to grow to 50 by the end of this year, and for AUM to increase accordingly.
The purpose of the association is to be “the voice of the industry”, to communicate with the Hong Kong government and other stakeholders on behalf of its members and facilitate newcomers to set up family offices in Hong Kong, Kwan explained.
Generational shift
He noted that in the next decade, trillions of dollars of wealth in Asia will be passed on from an older generation to a younger generation. “It is unprecedented…and Hong Kong will have a role to play,” he said.
Grant Ko, vice chairman of FOAHK, added that the younger generation of wealthy families now attach greater importance to “diversifying” their investments, and they are more willing to learn new technologies and accept new trends in order to better allocate their assets.
“The older generation, in general, are only interested in investing in real-estates, equities, bonds and their family businesses, while the younger generation are looking at a much wider asset classes,” Ko said.
Younger generations in Hong Kong are also looking into investment opportunities with ESG characteristics, digital currencies, limited partnership funds, special purpose acquisition companies (SPAC), as well as private investment or direct investment opportunities, he said.
