HK Investment Corp looks at private market bets in tech, green finance
The newly established Hong Kong Investment Corporation (HKIC) will focus on private market investments to drive the city’s competitiveness in fintech, AI, biotech, life sciences, advanced manufacturing, and green finance, a government official told AsianInvestor.
So far, the government-owned investment institution has received over 100 proposals from venture capital funds in artificial intelligence, fintech, Web3, etc., as well as asset management companies across Hong Kong, mainland China, and overseas markets, according to King Leung, head of financial services and fintech at Invest Hong Kong, the government’s foreign direct investment agency.
Invest Hong Kong is acting as a partner to HKIC and the Hong Kong Monetary Authority (HKMA) in the preparation to launch HKIC and its investment project selection.
Leung told AsianInvestor that HKIC is close to appointing its first chief executive officer, with new investments expected to follow by year-end at the earliest.
After the CEO joins, the government investment institution should be able to decide on new investments, Leung said.
In response to AsianInvestor’s enquiry, an HKIC spokesperson said the open recruitment of the HKIC CEO is “still ongoing”.
“Over time, the HKIC will gradually expand its management and investment teams as business develops,” the spokesperson said.
NURTURE WINNERS
Hong Kong’s Chief Executive John Lee announced the establishment of HKIC in his policy address in October 2022.
The initial assets allocated to the corporation are HK$62 billion ($7.9 billion), consisting of the HK$22 billion Hong Kong Growth Portfolio (HKGP), the HK$5 billion Greater Bay Area Investment Fund, the HK$5 billion Strategic Tech Fund, and the newly established HK$30 billion Co-Investment Fund.
At the initial stage of the HKIC's operation, HKMA will render support on investment, logistics and operational matters, including assisting the board to make decisions on investment projects.
HKIC will be more interested in private market investments to nurture winners in the innovation and technology space as opposed to pure financial returns, Leung noted.
This is what differentiates the HKIC from the HKMA’s Exchange Fund, which will continue to focus on both public and private market investments to defend the city’s financial system, he noted.
“They're trying to use the HKIC vehicle to give the financial resources to promote more innovation to create the future economic pillars of Hong Kong,” Leung said, noting that naturally venture capital investments would be the top choice.
“The primary focus is to develop the ecosystem for more job creation, more tech talents in AI, web3 and so on, and getting private investment coming in to co-invest with the governments,” he added.
HKIC will primarily focus on sectors including fintech, AI, biotech, life sciences, and advanced manufacturing, which are deemed to be expanded to other sectors over time, according to Leung.
Given Hong Kong’s ambition to become a green finance hub, he thought it was natural for HKIC to make green finance-related investments as its structure evolves.
“A number of institutions have submitted investment proposals to the corporation since its inception, including companies in the fields of innovation and technology,” the HKIC spokesperson said.
“The corporation together with the Office for Attracting Strategic Enterprises under the Financial Secretary's Office has been engaging in preliminary discussions with many interested institutions and will consider making investments in accordance with the investment criteria formulated by the board,” the spokesperson said.
GP SELECTION
As HKIC is shorthanded now, Leung said HKMA and HKIC will follow the traditional 80-20 rule, with most projects invested via specialist general partners (GPs).
HKIC will only consider direct investments that are of a certain size, with “very, very strong” strategic positioning and value to Hong Kong, Leung said.
“HKIC is still building out the team. They are still a bit shorthanded. Therefore, they simply don’t have the manpower to invest in a lot of small deals,” he said, noting that there isn’t a hard line for ticket size.
Since 2021, before the setup of HKIC, the HK$22 billion Hong Kong Growth Portfolio appointed eight private equity firms as GPs to invest on behalf of the fund.
All GPs either have their headquarters based in Hong Kong or have a substantial presence established in the city, the government said in previous announcements.
These GPs have “extensive experience” in making Hong Kong-related investments, including projects in Hong Kong and the Guangdong-Hong Kong-Macao Greater Bay Area across technology, healthcare, logistics and supply chain management, business and financial services, and consumer products, the government said.
“Going forward, the HKIC will continue to explore collaboration with more general partners in accordance with the investment criteria formulated by the board,” the HKIC spokesperson said.