1、Vision 2025 The future of Hong Kongs fund management industry Contents Foreword Executive summary Industry outlook Mainland China Technology ESG Looking ahead 01 02 06 14 20 26 33 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPM

2、G International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Hong Kongs fund management industry is experiencing a period of significant change and disruption in light of the ongoing global macroeconomic uncertainty, and more local challenges such as an ageing population,

3、 increasing competition, talent shortages, rising compliance costs and fee pressure. In more recent times, the COVID-19 pandemic has also had an impact on investor sentiment both in Hong Kong and worldwide. However, while the effects of the pandemic are likely to be felt for the foreseeable future,

4、we believe that the long-term vision and opportunities for the growth and development of Hong Kongs fund management industry remain clear and unchanged. This report, jointly authored by the Hong Kong Investment Funds Association and KPMG China, aims to identify these growth opportunities and to prov

5、ide an informed perspective on the future of Hong Kongs fund management industry. The results from a survey and interviews conducted as part of research for this report indicate a positive outlook for the future of Hong Kongs fund management industry, driven by growth opportunities related to the op

6、ening up of mainland Chinas asset management industry, the ongoing development of the Greater Bay Area (GBA), advances in technology-enabled client experiences and ESG investing. Indeed, the last few years have seen a significant amount of change in mainland China as its financial services industry

7、and capital markets open up to international investors. The scrapping of foreign ownership caps on fund management companies this April, and plans to launch a GBA Wealth Management scheme are welcome developments for fund managers. Meanwhile, technology-driven change is expected to continue, with in

8、vestors demanding an improved, increasingly digital user experience. We believe that in 2025, asset managers will no longer be just product providers, and will instead become firms that provide solutions to investors investment-related needs. ESG investing will also become the new normal, with inves

9、tors increasingly demanding that asset managers integrate ESG into their investment processes and offer more sustainability-related products. Hong Kongs fund management landscape in 2025 will look significantly different to its current form today. A number of challenges lie in the way, but they can

10、be addressed by close collaboration and active engagement between industry stakeholders to find smart, sensible solutions. In this report, we put forward recommendations which, if adopted, will help accelerate the growth of Hong Kongs fund management industry and maintain the citys position as a lea

11、ding asset management hub. We would also like to thank all the survey respondents for taking the time to provide their input, and the more than 20 senior industry executives who kindly agreed to be interviewed. The valuable views and insights we have received have been instrumental in shaping and en

12、riching this report. We hope that this report provides you with valuable insights, and we welcome the opportunity to discuss these findings further. Foreword Bruno Lee Chairman HKIFA Vivian Chui Partner, Head of Securities this is particularly the case for younger, digitally savvy clients who demand

13、 instant, personalised services and lower fees. That said, many clients still prefer a human touch when it comes to making sizeable investments. ESG investing will become the new normal, with pension funds and institutional investors continuing to raise the bar for ESG. Greater collaboration between

14、 industry stakeholders is needed to create clear ESG standards for Hong Kong. Top three trends that will have the biggest impact on Hong Kongs fund management industry Mainland China remains a key growth market for the industry as it opens up its asset management sector to foreign investors. The ong

15、oing development of the GBA also presents significant business opportunities for Hong Kong. 32% expect growth of more than in total AUM managed by organisations Hong Kong investment management business in the next five years 30% By 2025Beyond 2025 1 2 3 Regulatory change Fee pressure Rise of the Gre

16、ater Bay Area as a financial centre Ageing population Application of artificial intelligence Increasing connectivity 79%42% 79% expect their total AUM originating from mainland do not have a strategic plan for the GBA, China to grow by more than in the next five years 89% agree that “Providing susta

17、inable investing-related products is increasingly important to clients” while expect to formulate a strategy in the next 12 months expect their investment in technology to increase in the next 12 months 10% 37% A greater proportion of organisations technology investment is expected to be allocated t

18、owards data and client-facing technology Greatest skill shortages expected in the local labour market: ESG specialists 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss e

19、ntity. All rights reserved. 4Vision 2025: The future of Hong Kongs fund management industry ? ? ? ESG Demographics Short-term investing mindset The survey and interview findings culminated in a number of recommendations which, if adopted, will help accelerate the growth of Hong Kongs fund management

20、 industry and maintain the citys position as a leading asset management hub. Key recommendations Hong Kongs rapidly ageing population is a key challenge that requires a multi-pronged solution, including: - The creation of post-retirement products and the broadening of investable asset classes for MP

21、F members. - The introduction of incentives such as the governments matching of voluntary contributions to spur higher levels of contributions into the MPF system. - More, better investor education to help people understand their post-retirement financial requirements, and therefore their current re

22、quired level of savings; this should encourage them to increase engagement with, and contributions to, their pensions scheme. The Hong Kong government, local regulators and industry bodies should partner with authorities in mainland China to: - Enhance the existing MRF arrangement between mainland C

23、hina and Hong Kong by relaxing the 50% cap, as well as allowing the delegation of investment functions outside of Hong Kong to promote a greater variety of global products. - Implement the proposed framework for the GBA Wealth Management Connect scheme, with clear guidance on regulatory requirements

24、, products and operational logistics; the scheme should also consider including non-Hong Kong-domiciled funds. In order to avoid becoming commoditised product providers, asset managers should seek to partner with intermediaries to co-develop tools and solutions to better understand clients needs and

25、 create appropriate investment strategies. To accelerate the growth of AUM in the industry, fund managers should focus on segments that are currently underserved, including the younger, next generation of investors. Solutions like robo-advisory and innovative fintech will assist, while virtual banki

26、ng may also open up a new route to this segment. The industry, universities and research and training institutes in Hong Kong should work together to develop education programmes and professional qualifications that equip current and potential future fund management staff with relevant tech skills.

27、At a minimum, asset managers should commit to producing climate-related financial risk disclosures and becoming signatories to the UN Principles for Responsible Investment. The industry and regulators need to: - Fast-track the development of industry-wide standards for ESG in Hong Kong. The regulato

28、r is also encouraged to work with its counterparts in other key jurisdictions to achieve greater alignment on this issue. - Ensure that retail investors are properly informed about the benefits of ESG investing, and dispel the misconception that investing in ESG products means sacrificing returns. -

29、 Introduce an overarching framework in Hong Kong to maintain minimum standards and oversight of the ESG data provided by third parties, and to improve data integrity and credibility in the market. - Develop an industry-wide programme to offer structured ESG training and qualifications that combine b

30、oth financial and ESG skills and knowhow, using the European Federation of Financial Analysts Societies ESG Analyst certification programme as a reference. Design investor education and incentive systems to encourage long-term investing to improve retail investors outcomes. This will also help to ad

31、dress the issue of excessive portfolio churn and reduce the fees that investors pay in rebalancing their portfolios. 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss ent

32、ity. All rights reserved. 5Vision 2025: The future of Hong Kongs fund management industry ? Despite challenging times ahead, interviewees and survey respondents maintain a positive outlook for the future of Hong Kongs fund management industry, driven by growth opportunities related to the opening up

33、 of mainland Chinas asset management industry, the ongoing development of the Greater Bay Area, advances in technology-enabled client experiences and ESG. Close collaboration and active engagement between the industry and regulators will also be key to driving the development of the fund management

34、industry. Amid ongoing global macroeconomic uncertainty underpinned by slow growth and a low interest rate environment asset management companies worldwide continue to face a number of challenges. Coupled with more local short and long- term issues such as an ageing population, increasing competitio

35、n, talent shortages, rising compliance costs and fee pressure, Hong Kongs fund management industry is also experiencing a period of significant change and disruption. Recent social unrest and the outbreak of COVID-19 have also had an impact on investor sentiment in Hong Kong and the region. Despite

36、these challenges, interviewees and survey respondents for this report maintain a positive outlook for the long-term future of Hong Kongs fund management industry, citing a number of growth opportunities related to the opening up of mainland Chinas asset management industry, the ongoing development o

37、f the Greater Bay Area (GBA), technology-driven change and Environmental, Social and Governance (ESG) investing. Hong Kong continues to be viewed as the leading asset management hub in Asia in 2025 and beyond, with interviewees and survey respondents citing the citys deep talent pool, investment pro

38、duct diversity, competitive and open market, robust regulatory framework, and cultural and business proximity with mainland China as key differentiators. This view is supported by the numbers, with the city attracting USD 89.9 billion in gross retail fund sales in 2019, according to HKIFA data.2 Net

39、 retail fund sales for 2019 also hit USD 14.4 billion, compared to USD -0.5 billion in 2018 and USD 8.9 billion in 2017. Hong Kong is consistently seen as a highly desirable place to invest, with the city ranked third globally in terms of ease of doing business, up one place from 2018, according to

40、the World Bank.3 2 HKIFA, https:/www.hkifa.org.hk/upload/Documents/Retail-Funds/Sales-Redemptins-Data/SnR_cht.pdf 3 https:/www.info.gov.hk/gia/general/201910/24/P20.htm 2020 KPMG, a Hong Kong partnership and a member firm of the KPMG network of independent member firms affiliated with KPM

41、G International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6Vision 2025: The future of Hong Kongs fund management industry Year Source: HKIFA Source: MPFA Note: USD/HKD FX rate of 7 .789 and HKD/USD rate of 0.128 as of 31 December 2019 USD 65.9 billion Gross fund salesN

42、et fund sales USD 89.5 billion USD 87.3 billion USD 89.9 billion USD 3.1 billion USD 8.9 billion USD -0.5 billion USD 14.4 billion 2017 2018 2019 2016 Industry overview Hong Kong Retail Fund Gross this could even encourage an increase in contributions to the MPF system and mitigate the adequacy issu

43、e. As individuals near retirement, the stabiliser in many lifecycle retirement products is to increasingly look to exit risk-seeking assets and replace them with fixed income as the individual approaches their date of retirement. “Steady and regular income flows is a key requirement for retirees, an

44、d asset managers need to be able to provide simple, cost-effective product strategies that can meet their needs and provide them with the comfort that they can receive a stable income post-retirement,” says Isabella Chan, Head of Global Financial Institutions, APAC and Head of Retail Business, Great

45、er China, Franklin Templeton Investments (Asia). Interviewees highlighted that a number of studies have been conducted to find out the gap between the required level of saving before retirement and the actual level of savings needed to sustain incomes across an expected lifespan. “In Hong Kong, some

46、 findings have shown that there is about a five-year gap between the amount of money that people can have available to them post-retirement and their life expectancy. So how do we bridge that gap? The ultimate solution the industry is trying to deliver is to help people understand what they will nee

47、d to invest today versus what they want as income in the future. The uncomfortable truth is that people do not want to take risks but everybody wants better return, so more education is needed to help investors realise and understand that there is always a trade-off between risk and return,” says Br

48、uno Lee, Regional Head of Retail Wealth Distribution, Wealth these have the potential to accelerate the growth of the industry in the years ahead: the opening up of mainland Chinas asset management sector, the development of the GBA, technology-driven change and ESG. Key takeawaysKey takeaways Overr

49、egulation is an issue for some asset managers in Hong Kong, while in some areas, the industry is calling for greater regulatory clarity around the GBA initiative and ESG. Finding the right balance between investor protection and perceived overregulation will be key to further growing the market while safeguarding the interests of investors. Product quality will be the ultimate arbiter when it comes to fending off the pressure on fee