The territory’s asset and wealth management industry held assets worth HK$24trn ($3.06trn) as of 31 December.
The adjusted – excluding assets held under trusts – value was HK$23trn, with the value of assets managed by licensed corporations (LCs) and registered institutions (RIs) shrinking 6% to HK$16.45trn, and AUM of the private wealth management business slipping 2% to HK$7.62trn
Yet, net fund inflows were HK$783bn, according to the SFC’s “Asset and Wealth Management Activities Survey 2018”, a report published late last week.
Significant volatility in Asia-Pacific equity markets accounted for the disparity. The MSCI AC Asia Index fell 15.6%, the Hang Seng index declined 13.6% and the Shanghai Composite Index plunged 24.6% last year, compared with a 10.4% fall by the MSCI World Index, noted the survey.
Otherwise, the report said, Hong Kong’s asset management industry looks in good structural shape.
Although the net asset value slumped 13% year-on-year to HK$1.08trn due to the impact of market turmoil, as of the end of 2018, the number of Hong Kong-domiciled SFC-authorised funds increased 3% year-on-year to 775, and the number of corporations licensed for asset management (Type 9 regulated activity) in Hong Kong rose 11% to 1,643.
In addition, the number of licensed corporations and registered institutions established by mainland China groups in Hong Kong increased 8% to 362 from 334, according to the report.
“The latest survey shows the underlying strengths of the asset and wealth management industry in a challenging global market environment in 2018. We will continue to pursue initiatives to further develop Hong Kong as a premier global asset and wealth management centre,” said Ashley Alder, the SFC’s chief executive officer in a statement.
The survey received responses from 854 Hong Kong firms, including 747 licensed corporations, 45 registered institutions, 35 insurance companies and 27 trustees.
For the first time, the survey covered assets held under trusts “to provide a more comprehensive overview of the asset and wealth management industry in Hong Kong”, the regulator said in a press statement. These assets amounted to HK$4.3trn at the end of last year.
The survey also found that non-Hong Kong investors “remained a major source of funding for the asset and wealth management business, accounting for 62% of the AUM” – although the proportion is on a declining trend, having comprised 71% in 2014.
Assets actually managed in the territory made up 55% of the total AUM, which is similar to each of the previous five years, and the survey found that there is a growing proportion of staff employed at Hong Kong businesses who are engaged outside of sales and marketing activities.
Public funds, including both SFC-authorised funds and funds authorised in other jurisdictions, accounted for 35% of the asset management and fund advisory business, followed by managed accounts (26%) and private funds (18%), which include hedge funds (6%) and private equity and venture capital (5%), according to the survey.
SFC initiatives
The SFC introduced several initiatives during the past few months to boost Hong Kong’s asset and wealth management industry. Following the implementation of mutual recognition of funds (MRF) arrangements with the mainland and five other markets, the SFC further expanded its MRF network to include the UK in October 2018, Luxembourg in January 2019 and the Netherlands in May 2019.
The SFC also relaxed the leverage cap for inverse products to a factor of two-times negative (-2x) and introduced active exchange-traded funds.
From November 2018, enhanced conduct requirements were also introduced in areas such as securities lending and repurchase agreements, custody of fund assets, liquidity risk management and disclosure of leverage by fund managers, the report said.
Hong Kong asset and wealth management overview
1. Includes assets held under trusts which were managed by LCs and RIs ($3,425bn). 2. The amounts of $14,526bn and $1,094bn include the AUM of the asset management business provided to private banking and private wealth management clients by LCs ($98bn) and RIs ($926bn) respectively. 3. The amount of $827bn represents the AUM of insurance companies excluding those assets which were sub-contracted or delegated to other LCs or RIs in Hong Kong for management. 4. The amount of assets held under trusts was $4,333bn, out of which $908bn represents the assets held under trusts which were not managed by LCs or RIs (assets held under trusts attributable to non-LCs/RIs).
Source: Securities and Futures Commission
