FamilyOfficeHK takes aim at strategic markets amid rising competition
Hong Kong will target a few strategic markets in its bid to encourage more family offices to set up shop in the city, a senior executive from a government agency said.
"Our strategic destinations are the Middle East, Europe, Southeast Asia and of course, mainland China," Christine Ho, deputy global head of FamilyOfficeHK, a team set up under Invest Hong Kong to attract family offices to the city, told AsianInvestor.
Invest Hong Kong is a government department under Hong Kong's Commerce and Economic Development Bureau.
As part of efforts to increase its European presence, FamilyOfficeHK recently hired a head of Europe in Brussels, who started in October, said Ho. She did not provide any futher details on the hire.
Hong Kong’s government, headed by chief executive John Lee, aims to get at least 200 of the world’s top family offices to set up or expand their operations in the city by 2025.
As part of measures to attract family offices, the government announced a concessionary tax regime for family-owned investment holding vehicles managed by a single family office in the city.
FamilyOfficeHK, launched in 2021, has helped 14 family offices set up base in Hong Kong between June and October 2022, the latest data available.
GEARING FOR GROWTH
Mainland China and the Greater Bay Area in particular is viewed as the biggest growth opportunity for the private wealth management industry, according to a joint report by KPMG and Private Wealth Management Association released in October 2022.
The size of the Greater Bay Area economy is equivalent to the 12th largest economy in the world and aggregate GDP is estimated to reach $4.6 trillion by 2030.
More than 450,000 high net worth individuals – those with over $1 million in assets – live in GBA, according to several older estimates.
The government is betting on deeper integration with GBA to attract family offices from the mainland to Hong Kong.
Ho and her team also went on roadshows to Europe and the Middle East in the last quarter of 2022 to showcase Hong Kong’s advantages and woo potential clients.
At least two-thirds of the family offices in London had a positive response to Hong Kong opening up (from Covid-19 restrictions), she said.
In some cases, there was feedback and questions asking for more information. “I see that as a good sign because it means they are interested,” she said. “Many of these families have probably relatively smaller allocations to Asia, but they are hearing more stories about Asia and the mainland.”
Most family offices wanted to know if there were material changes in growth expectations and if there would be any policy changes towards economic growth, she added. “They want to evaluate the risks involved and know more about how they can understand the market better.”
Still, there are many established wealthy European families that are very comfortable where they are right now. “They are also mindful of the geopolitical environment and would rather adopt a more conservative approach and have a wait-and-see approach,” said Ho.
PE, VC CONNECTION
Interest from families in the Middle East - where an estimated $1 trillion is estimated to change hands from one generation to the next over the next decade - has also been quite evident.
Wealthy families in the Middle East generally tend to have higher risk tolerance, she said. “They are quite interested in new types of investment opportunities such as blockchain, cryptocurrencies, etc,” said Ho.
For these families interested in setting up a family office in Hong Kong, it’s more about “wanting to know where they can find more information on startups or new technology,” she said.
Some of them have indicated they want to increase exposure to Asia, “either through listed equities or the more adventurous route of investing in venture capital and private equity funds,” said Ho.
While first generation or older families globally tended to invest in real estate, younger generations of wealthy families lean towards investing in new areas such as technology, clean energy transition and artificial intelligence, according to experts.
They tend to therefore, gravitate, to locations where such opportunities are ample or alternatively, enable access to such opportunities more easily. Having the ecosystem of services around such opportunties is also important.
Hong Kong is one of the world’s top destinations for initial public offerings - one way for venture capital investors to exit an investment.
Finally, in Southeast Asia, Thailand is also one of the key markets for FamilyOfficeHK.
“Thailand families are already familiar with Hong Kong and the mainland; many of them already have operations here, even the older [wealthy] families,” said Ho, adding that many of these families are looking to increase allocations to the rest of Asia.
COMPETING FOR ATTENTION
Raffles Family Office
Still, Hong Kong faces tough competition from other locations such as Singapore and Dubai, which are also nursing ambitions to become family office hubs.
Dubai launched a Global Family Business and Private Wealth Centre in September 2022 to offer access to a wide range of support services to enable growth and succession planning of family businesses and ultra high net worth individuals from the region and globally.
Singapore also unveiled a host of new rules in 2022, that raise the bar for performance and professionalism in the family office industry and will likely attract interest from China, Hong Kong, India and Indonesia.
Industry experts, however, say Hong Kong, is still in with a fighting chance.
“Hong Kong offers a wide range of unique opportunities for development in the GBA and wider Asia-Pacific region, such as ESG investments, digital assets, technology, making it an attractive destination for family businesses seeking long-term investments,” Chi-man Kwan, group CEO and co-founder of Raffles Family Office, a multi-family office, told AsianInvestor.
Viola Lui, partner at legal firm Clifford Chance noted that confidence in Hong Kong primarily stems from its infrastructure, its robust regulatory regime, the rule of law under the one country-two systems framework, as well as a vibrant and diverse talent pool.
Both Kwan and Lui have a positive outlook on the growth of the family office industry in Hong Kong this year.