Investment platform with a rich edge (hktdc.com)


	Hong Kong is the preferred wealth management platform for China, broadening its base as an international financial centre

	Elisabeth Scott of Schroder Investment Management says Hong Kong has Asia's finest fund management teams

Hong Kong's asset management business continues to gain pace, further broadening the city's base as an international financial centre.

Figures released by the Hong Kong Securities and Futures Commission (SFC) show that by the end of last year, Hong Kong's combined fund management business amounted to HK$6.15 trillion (US$786.4 billion), an increase of 36 per cent over 2005, and an aggregate growth of more than 70 per cent over the past two years. It was equivalent to 4.2 times of GDP in 2006, compared to 3.3 times in 2005.

Asset management, which accounted for the largest share of the combined fund management business, recorded impressive growth of 27.5 per cent last year. Advisory business and other private banking activities grew 67.1 per cent and 54.5 per cent, indicating a broadening in the range of fund management activities conducted in Hong Kong.

Alexa Lam, the SFC’s Executive Director of Intermediaries & Investment Products, said the results underscore the strength of Hong Kong's asset management business. She added that under Cepa (the Closer economic partnership arrangement), the SFC would work closely with mainland regulators to provide a wealth management platform for China. "Our aim is for Hong Kong to become the one-stop supermarket where mainland investors can shop for the best wealth management service and products the world has to offer," Ms Lam said.

China connection

Kirby Daley, Head of Sales and Capital Introduction for Fimat Alternative Investment Solutions – Asia, agrees that the China connection gives Hong Kong an unbeatable edge.

"Hong Kong is still viewed as the gateway to China for China-focused hedge fund managers," he said. "Since the bulk of Asian hedge fund management focus is on equities, having a base in Hong Kong makes a lot of sense if you are going to be researching and investing in Chinese companies.

"Coupled with this is the fact that Hong Kong is a major financial centre for Asia with a global reputation as a strong financial hub. It is a vibrant, dynamic and cosmopolitan city which should continue to make Hong Kong a destination of choice, particularly for the younger generation of hedge fund managers."

Stephen Gallop, CEO of financial services firm Tyche Group (formerly Bridgewater), says Hong Kong’s efficiency is one of its key strengths, making it "very easy to do business".

"The currency – pegged to the US dollar – works in our favour as it makes us very competitive, especially at a time when everywhere else is becoming more expensive," he continued. Coming from England, Mr Gallop adds he is impressed by the talent and general work ethic of Hong Kong staff, and their "can do" attitude.

For financial services firms doing business in the region, Mr Gallop says Hong Kong’s financial regulator, the Securities and Futures Commission, is in itself an advantage. "The SFC is recognised as a fairly strict, established regulator which is doing a good job," he said. "We find we can get business in the region just because of the SFC – its reputation puts Hong Kong a step ahead immediately."

Global view

The SFC also allows brokers "total discretion" to buy what products they want for the client. "Very few if any (other) regulatory bodies allow that," Mr Gallop says. "From Hong Kong we get a global perspective and if a fund manager isn’t already here they are happy to transact business with SFC-registered advisers. This literally means we can source assets from the entire globe for inclusion in our portfolios. We can open our eyes to the best investment without worrying about what market it’s in, which is very much to the investor’s benefit.

"And, Hong Kong has that great feeling of being next door to China. The flow of financial funds (from the mainland) may be just a trickle at the moment, but it has the potential to be enormous."

Elisabeth Scott of Schroder Investment Management (Hong Kong) says the city’s human talent is another advantage. "Asia’s strongest fund management teams are based in Hong Kong. They are people with the knowledge and experience to invest in markets especially in north Asia, and are also able to take money from China to the world."

For international investors wanting exposure to the growth story in China, Hong Kong makes the best platform, added Ms Scott, Chairman of the Asian Financial Forum held in Hong Kong in September. "The key attributes of Hong Kong are very clear: transparency, a strong regulatory environment, rule of law and pool of expertise."

With Hong Kong’s asset management business being boosted in three ways – by international investment, a strong retail market and the Mandatory Provident Fund – that points to a very exciting time ahead for financial services firms in Hong Kong.

Hong Kong is a conduit for huge China savings