Fund management activity grows in HK

Hong Kong’s Securities and Futures Commission has released an annual survey of fund management activity in the territory and concluded that the funds industry continues to grow there.

The Mandatory Provident Funds scheme was the biggest reason for a rise in the territory’s asset management industry, with MPF funds in 2002 rising 56%. This programme, launched in January, 2001, has fulfilled its promise of steadily rising inflows to mutual funds.

Another prop was the popularity of principal-guaranteed mutual funds. The SFC has found that newly SFC-authorized retail funds’ assets rose 38% last year. What is surprising, however, is not that guaranteed funds played a role, but that many other asset classes did too: of the 399 funds the SFC authorized last year (raising HK$298 billion, or $38 billion), 28% were guaranteed funds.

Non-SFC authorized funds (such as many hedge funds) and the growth of private banks’ high-net worth business also saw asset growth. Together all these factors helped offset declines elsewhere, keeping total assets under management in Hong Kong (excluding those under purely investment advice) amounted to HK$1,491 billion ($191 billion).

Institutional funds and pension funds declined, however. Institutional assets fell 14%, from HK$333 billion to HK$285 billion. Pension fund assets fell 19% from HK$141 billion to HK$114 billion.

Hong Kong’s total AUM has remained steady around the HK$1.5 trillion mark for three years now, but other signs demonstrate growth in Hong Kong’s role as a regional industry centre.

For example, the number of companies providing fund management or advisory services rose 12% from 172 to 192. And 36 of these now call Hong Kong their Asian headquarters, up from 34. The SFC reported 44 new boutique-sized companies responding to its survey. While 63% of the total AUM is sourced from overseas, assets sourced from Hong Kong investors rose 23%, from HK$454 billion to HK$558 billion. The SFC reports there were 856 investment professionals located in Hong Kong.

Singapore retains a slight edge as a funds industry hub. The Monetary Authority of Singapore reported an industry size of S$343.8 billion ($197 billion) as of end-2002, employing 1,012 investment professionals.

Like Hong Kong, Singapore’s institutional market is stagnant, now that the burst of mandates from official institutions and statutory boards has petered out. But moves to liberalize management of monies in the Central Provident Fund scheme and easing the way for offshore funds also makes it a growth market for retail.