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The Asian fund industry has been going through a growth spurt. International managers were relocating to Hong Kong and starting up their own Asia-focused funds since the early 1990's. Allocators are increasingly focusing on Asia for further investment opportunities and funds with a global mandate are increasing their allocation to Asia. The Asian hedge fund industry has grown nearly six times while managing ten times as much in assets since 2000 according to Eurekahedge. The industry is estimated to consist of over 1100 funds, managing roughly $175 billion in assets.
Hong Kong is one of the most important fund management centres in Asia - an open market, with many international fund companies establishing headquarters or other forms of presence. It has an open architecture that allows products from different jurisdictions to be promoted and marketed to the general public and 95% of the Hong Kong Securities and Futures Commission (HKSFC) authorised funds are offshore in nature. Regulation, on the retail HKSFC authorized funds framework as well as the Mandatory Provident Fund System is well-tested and serves as useful to counter parties.
The Hong Kong Investment Funds Association (HKIFA) indicates that there are 2,123 authorised funds, the funds NAV totalled US$10,077bn as of the second quarter of 2008 according to the Securities and Futures Commission (SFC). Hong Kong is now the largest ETF market in Asia ex-Japan. It had 23 SFC authorised ETFs with an aggregate market capitalisation of HK$112 billion as of 30 June 2008.
Hong Kong has the infrastructure and a pool of expertise - both on the retail and institutional side - on which the Mainland Chinese counterparts can capitalise. Up to the end of June 2008, the State Administration of Foreign Exchange granted a total investment quota of US$38 billion to nine Mainland fund management companies and one securities firm and US$16.6 billion quota to 21 Mainland commercial banks. This covers investment management, risk management, compliance, marketing and distribution, product development and innovation, as well as back office administration. The expertise and experiences available in Hong Kong is useful to the development of China's institutional and retail markets. On the institutional market, the Hong Kong market has a long track record in discretionary investment management services and the experiences are of relevance to Mainland Chinese counterparts when the latter develops this market segment. On the retail side, with increasing competition, Chinese fund companies are faced with product development and broadening the distribution channels, and these are the areas that Hong Kong specialises in.