Name
Global FinTech Guide
Country _ Name
Hong Kong
SectionTitle
Asset and portfolio management
Body
FinTechs belonging to this category offer asset and portfolio management services via an internet platform or software programs and usually manage and dispose of the assets of their customers long or short term according to their specifications without actually holding the property or the possession of those assets. FinTechs, which provide information about and access to overnight or time deposit accounts at national and foreign banks and which execute the transactions to these accounts, also belong to this category. Some FinTechs however only act on request of the customer.

Aside from that some FinTechs offer software or internet solutions enabling users to manage and plan their personal finances on their own by providing graphics, overviews and compilations of their financial data and sometimes indicating financial risks or opportunities, but without actually managing the assets.


Introduction

Attitude of the country towards modern asset and portfolio management services

As an international financial centre, Hong Kong is an important asset management hub. There is a supportive environment in Hong Kong for asset and portfolio management.
Wealth Management Connect was introduced in the Guangdong-Hong Kong-Macao Greater Bay Area in 2021, where Hong Kong-domiciled funds managed by over 30 asset managers were made available to Mainland Chinese investors via Hong Kong banks and securities firms.

Hong Kong has an established Mutual Recognition of Funds framework. In January 2024 enhancement measures were announced, expanding the scope of participating institutions to include eligible securities firms, expand the scope of eligible products, increase individual investor quota and further enhance the promotion and sales arrangements.


Legal affairs

Obligations and requirements to provide asset and portfolio management, or ancillary services described above

Under the Securities and Futures Ordinance ('SFO'), asset management is a regulated activity (Type 9). Any person who carries on a business in asset management must, unless otherwise exempted, hold a SFC Type 9 license. The SFC has comprehensive requirements on how to obtain a licence and comply with the relevant regulatory obligations. The core statutory requirements are found in the SFO, the subsidiary legislations and the codes, guidelines, circulars, and other forms of guidance published by the SFC from time to time. See its website: https://www.sfc.hk.

Pursuant to the 'Joint circular on intermediaries’ virtual asset-related activities' issued by the SFC and the HKMA dated 22 December 2023 ('Joint Circular'), intermediaries intending to provide asset management services in relation to VAs and meet the de minimis threshold (i.e., a stated investment objective of a portfolio to invest in VAs or an intention to invest 10% or more of the gross asset value of a portfolio in VAs) are required to seek SFC's prior approval and are subject to additional requirements set out in a proforma terms and conditions under the Joint Circular.

iii. Product Authorisation Requirements
The SFO also regulates the promotion and the offering to the Hong Kong public of interests in a collective investment scheme.
It is an offence under the SFO to issue any advertisement which is or contains an offer to the Hong Kong public to acquire an interest or participate in a collective investment scheme unless it has been authorized by the SFC or an exemption under section 103 of the SFO applies.

Additional comments regarding the legal situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

Asset managers licensed by the SFC should take note of the anti-money laundering and counter-terrorist financing laws which cover their customer due diligence obligations.


Economic conditions

Market size for asset and portfolio management services and biggest companies in this business area

Hong Kong serves as the gateway for both overseas investors who wish to invest in Mainland China and for the Mainland investors who wish to invest in the international markets. This has contributed to the steady growth of the asset management industry in Hong Kong.

According to the latest available information from the SFC, at the end of 2023, the number of Hong Kong-domiciled SFC-authorised funds increased by 5% years-on-year to 914. The total assets under management (AUM) in Hong Kong grew 13% year-on-year to HK$35,142 billion as of end-2024; net fund inflows surged 81% to HK$705 billion in the year according to the Asset and Wealth Management Activities Survey 2024 issued by the SFC.

According to the Financial Services and Treasury Bureau ('FSTB') of Hong Kong, the asset and wealth management business of Hong Kong amounted to around $31 trillion (US$4 trillion) as at end-2023, with 64% of the fund sourced from non-Hong Kong investors.

The Wealth Management Connect scheme will benefit asset managers, as well as banks and other financial institutions.

Additional comments regarding the economic situation for asset and portfolio management services or what FinTech’s must be aware of in this business area

Cross-border offerings of eligible Hong Kong public funds to the Mainland and other overseas markets are actively promoted through the arrangements of mutual recognition by the SFC ('MRF'). This facilitates the expansion of the investor base for Hong Kong public funds, diversifies the choices of fund products offered, promotes Hong Kong as a competitive global asset and wealth management centre and encourages the development of local investment expertise.

Over the past decade, the SFC has entered into 10 memoranda of understanding on MRF with different regulators of the asset and portfolio management internationally. Taking the most recent new addition of MRF, Ireland, as an example. The MRF with the Central Bank of Ireland (CBI) allows offering of retail funds between Hong Kong and Ireland. This enables certain funds in Ireland to enjoy a streamlined approval process.

The list of the countries/regions that SFC has entered into MRF includes (as of the date of writing): Australia, France, Ireland, Luxembourg, Mainland China, Malaysia, Netherlands, Switzerland, Taiwan, Thailand, and the United Kingdom.

New options have been introduced in the last few years to make Hong Kong a more attractive centre to originate funds. For example, a legal framework for new fund structures in the form of open-ended fund companies ('OFC') in Hong Kong since July 2018, and in August 2020, the limited partnership fund ('LPF') regime will enable funds to be constituted in the form of limited partnerships. These companies/funds will enjoy some tax exemptions.

InvestHK, a government department responsible for foreign direct investment, has a dedicated team to offer one-stop support services to family offices which are interested in establishing in Hong Kong.
ESG-related funds, including carbon-themed funds, is likely to be a growth area. As at the end of September 2024, there were 231 ESG-related funds, representing year-on-year increases of 23%.

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