Edmond Lau: Opening Remarks
Opening Remarks by Mr Edmond Lau, Senior Executive Director of the Hong Kong Monetary
Authority, at the Family Office Symposium 2021, 19 January 2021.
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Amy (LO), distinguished guests, ladies and gentlemen:
1. Good afternoon, and happy new year. And I wish all of you a prosperous as well as a healthy
year of 2021. It gives me great pleasure to return to this symposium and deliver my opening
remarks for the second year.
Taking global wealth into next level
2. Despite the serious disruptions caused by covid-19 to many sectors of the economy, the
global financial markets seem to be well supported by the risk-on sentiments boosted by the
unprecedented policy support from governments around the world, as well as developments
on the vaccines. The trajectory of global wealth growth has also not been changed by
covid19. According to an industry research, by summer last year, global billionaire wealth had
already recovered from the market losses in Q2 last year, and reached new high of more
than US$10 trillion now.
3. However, the prospect of a global economic recovery remains uncertain, and a low yield
environment is likely to stay with us in the coming years. To family offices and private wealth
managers awash with funds, the "billion-dollar question" is, "how can we keep wealth
growing?"
4. There are reasons to believe that an answer is available in "Asia". In the short term, with a
more effective handling of the pandemic, a number of Asian economies experienced much
less disruption than their counterparts in the West. Take Mainland China as an example. It
was seriously hit at the onset of the pandemic. But notably it is also the first major economy
to keep the pandemic under control, and achieved an expansion of GDP by 2.3% on a
yearon-year basis in 2020.
5. Looking ahead, many Asian economies will continue their strategies to move up the global
value chains, from just being manufacturing centres to gradually taking up activities with
higher value, such as technology innovation. Exciting wealth creation opportunities will
continue to unfold.
6. All these opportunities in the region will attract global wealthy families to set up a base in
Asia. In terms of choice of the location of the base, there are always three key areas of
consideration in the mind of the family offices:
access to investment opportunities;
ease to raise fund; and
security during turbulent times.
Capturing Asia opportunities via Hong Kong
7. Over the years, taking into account all three factors, Hong Kong still maintains an unrivalled
position as an investment hub for family offices in the region.
8. First, on access to investment opportunities, Hong Kong boasts its world's leading capital
markets and asset management industry, offering an unparalleled variety of investment
opportunities. Our asset management industry comprises more than 1,800 asset managers
who managearound US$3.7 trillion of assets. Under the low interest rate environment, there
is an increasing trend for family offices to allocate more assets to the private market. Hong
Kong is the largest private equity, or PE, hub in Asia after Mainland China. Close to 600 PE
firms have set up offices in Hong Kong.
9. At the same time, Hong Kong is also the dominant investment gateway of Mainland China. In
2018, over half of Mainland China's foreign direct investment was channelled through Hong
Kong. International investors can also utilise our unique Stock and Bond Connect schemes
to get access to the Mainland's onshore stock and bond markets. The Connect schemes
have now accounted for over half of the Mainland's portfolio investments from international
investors.
10. Looking ahead, new measures are gradually introduced under the Greater Bay Area initiative
to foster greater collaboration within the region. These will provide more opportunities for
Hong Kong investors to gain from the development of China's most economically vibrant
region. One good example is the Wealth Management Connect to be launched soon.
11. Second, on raising funds, Hong Kong's equity market topped the global IPO league table for
7 times since 2009. Our vibrant stock market could help many entrepreneurs to unlock their
wealth by floating their businesses in Hong Kong. We also have a highly competitive
banking industry that can offer alternative arrangements for families that are reluctant to sell
their family businesses or investments.
12. Third, on security, when I spoke at this symposium a year ago, I shared the robustness of
our financial system and highlighted the buffers we had built over years. We could not have
predicted that another tough test, covid, would be so near to us at that time. Yet, Hong
Kong's financial system has coped with that very well.
13. Hong Kong's financial stability is uniquely characterised by, firstly, our Linked Exchange Rate
System, which keeps the fluctuation of the value of HKD against USD within a narrow
trading band and, secondly, our free flow of capital, which is enshrined in the Basic Law. In
the past year, we saw continuous inflow into both the HKD and the banking system despite
all the challenge. Hong Kong has been a safe haven to many international investors.
14. All these attributes have allowed us, over the years, to become Asia's largest and world's
second largest international wealth management hub, with US$1.9 trillion of cross-border
wealth under management. Another industry survey also revealed that Hong Kong is home
to around 10,000 ultra-high-net-worth individuals.
15. However, we must never sit on our laurels. The HKMA has been working closely with the
industry and other government agencies to roll out new initiatives to further enhance Hong
Kong's attractiveness to family offices.
16. After my talk in this symposium last year, we continued to strengthen our support to family
offices. We assisted InvestHK in completing the set-up of their one-stop information site.
The Government has also announced the creation of a dedicated unit in InvestHK to help
family offices settle in Hong Kong.
17. Beyond that, in August last year, we introduced a new investment vehicle called the "Limited
Partnership Fund", LPF. This new and flexible vehicle can be used by private equity funds
and venture capital, and can also be used as an asset holding vehicle like family offices. In
just a few months, we have already seen over 70 registrations under this new platform. The
LPF regime is well received by the industry. In addition, we are working on a legislative
proposal to provide competitive tax treatment for the carried interest, which we hope would
be effective later this year. We are confident that all these will give fresh impetus to the
continual development of the local private investment landscape.
Closing
18. Ladies and gentlemen, there are many more interesting topics and developments in our city
that I am unable to share with you today because of time. On the "billion dollar question" that
I have mentioned, I am sure that the expert speakers invited by the PWMA will give you more
valuable insights during the coming sessions. This also signifies another value of Hong
Kong - investors always enjoy the privileged access to a pool of experts and professionals
from different sectors here in Hong Kong.
19. I wish today's symposium a great success. Thank you very much.