To meet the burgeoning demand from Chinese fund managers for foreign currency products and international exposure, a growing number of prominent China-based fund managers have opted to establish a presence and set up funds in Hong Kong. This trend has gained momentum, with several managers now overseeing funds exceeding RMB 10 billion.
With over HK$35 trillion in assets under management and a concentration of investment professionals, Hong Kong is recognized as Asia's leading asset management hub. Chinese fund managers can easily tap into this vibrant ecosystem, benefiting from the expertise, resources and networking opportunities available in the city. The Hong Kong government is boosting its efforts by proposing a company re-domiciliation regime so that companies can utilize the city’s favorable business environment and professional services.
Following are some key considerations for onshore Chinese fund managers who decided to set up shops in Hong Kong:
- Easy access to global investors: Attracting a broader global investor base has always been a challenge for onshore Chinese fund managers due to the regulatory and operational environments. By establishing a presence in an international fund hub like Hong Kong, Chinese fund managers can efficiently distribute their investment products to global institutional investors. This provides an opportunity to expand their reach and attract investors interested in increasing their exposure to China.
- Favorable regulatory environment: Hong Kong's distinct regulatory landscape, overseen by the Securities and Futures Commission (SFC), offers a favorable climate for Chinese fund managers looking to expand offshore. The practice of common law in Hong Kong provides a well-established legal framework that instills confidence in both domestic and international investors when investing in China through Hong Kong-domiciled funds. With regulatory familiarity, geographic proximity, investor protection, streamlined compliance and operational processes, and professional support, Hong Kong funds and a local presence simplify the setup process for Chinese fund managers.
- Leverage Hong Kong’s reputation as an asset management hub: Hong Kong is widely recognized as Asia's leading asset management hub. It manages a significant portion of alternative assets in the region and provides a wide range of investment options, alpha opportunities and risk management tools. Having a presence in Hong Kong enhances the reputation and prestige of Chinese fund managers, positioning them as key players in the global asset management industry.
- Greater flexibility for fund structuring: Offshore locations like Hong Kong allow for the establishment of standalone funds and master-feeder funds domiciled outside mainland China. With higher flexibility, onshore Chinese fund managers can set up funds in Hong Kong more easily and even cater to qualified investors globally, without limitations on the number of investors. This enables Chinese fund managers to attract a diverse range of investors from different jurisdictions.
- Investment scope and strategies: Through establishing funds in Hong Kong, Chinese fund managers can broaden their investment scope and explore various hedging strategies. They can learn from and collaborate with their peers in the international finance community, gaining valuable insights and expanding their expertise in managing different investment strategies.
- Diverse talent pool: Being a prominent asset management hub, Hong Kong boasts a diverse talent pool with exceptional globality to facilitate the development and execution of investment strategies, including fund management, investment analysis, risk management and compliance. Hong Kong, in particular, has a higher concentration of international tax advisors who understand the complexities of cross-border taxation such as double taxation, transfer pricing and tax optimization strategies. Their expertise helps funds navigate the intricacies of international tax laws.
- The GBA opportunities: As a leading international arbitration center, Hong Kong plays a pivotal role in the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area)—a Chinese government initiative to connect 11 cities in the South of China for economic growth. The economic integration, coupled with initiatives such as the Cross-boundary Wealth Management Connect Scheme, creates ample cross-border investment opportunities for onshore Chinese fund managers. This enables them to participate in the growth and development of the Greater Bay Area's vibrant industries, such as technology, finance and innovation.
From access to global investors and a favorable regulatory environment to expanded investment scope and the prestige of being part of a prominent asset management hub, Hong Kong provides a strategic location for Chinese fund managers to grow their operations, attract investors and enhance their global presence. By capitalizing on the opportunities presented by Hong Kong's offshore ecosystem, Chinese fund managers can position themselves for long-term success in the international financial landscape.
Realize your goals
When playing the long game, it is crucial to choose strategic partners wisely. It goes beyond selecting the lowest-cost option; instead, focus on those who know local nuances and can consistently deliver service excellence, utmost accuracy and global scalability while aligning with international best practices.
Setting up offshore funds can present challenges for Chinese fund managers, particularly in effectively communicating their goals and requirements due to language barriers and cultural differences with service providers from different jurisdictions. To address this, we have cultivated a substantial team in Hong Kong dedicated to providing white-glove service to Chinese managers. This dedicated team is supported by our global production support teams, state-of-the-art infrastructure and a comprehensive suite of end-to-end solutions.
We are looking forward to supporting more Chinese fund managers in establishing a presence in Hong Kong, ensuring that they receive the highest level of service and support. By choosing us as your partner, you can have confidence in our commitment to delivering excellence and assisting your long-term success in the ever-evolving investment landscape. Contact us to learn more.
Vivian Zou, Senior Director, SS&C GlobeOp, contributed to this article.
