The annual Fund Management Activities Survey (FMAS) released today by the Securities and Futures Commission (SFC) shows that despite a 10.4% year-on-year decline, the combined fund management business (Note 1) continued on an uptrend on a trailing three-year average basis while achieving a number of milestones in expanding the range of renminbi investment products.
The latest survey indicates that Hong Kong remained a preferred platform for international investors investing in the region. Overseas investors have consistently contributed over 60% (i.e. $5,643 billion; Note 2) of the total fund management business, excluding real estate investment trusts (REITs). This proportion has remained steady over the past five years.
“The local fund management industry continued to develop despite challenges stemming from the global economic environment in 2011,” said Mrs Alexa Lam, the SFC’s Deputy Chief Executive Officer and Executive Director of Policy, China and Investment Products. “The SFC will keep in view developments in the financial markets and where necessary, additional safeguard measures may be considered given the uncertain global economic outlook and the continuing European debt crisis.”
Below is a breakdown of the performance of different market players:
Licensed asset management and fund advisory houses continued to contribute the largest proportion of the combined asset management business. Their aggregate asset management and fund advisory businesses amounted to $6,205 billion at the end of 2011, down 15.1% from end-2010.
Registered institutions recorded a 0.04% decrease in their aggregate asset management and other private banking businesses to $2,422 billion at end-2011.
Insurance companies reported assets under management of $287 billion at the end of 2011.
Some highlights of the survey include:
Non-REIT asset management business decreased by 15.8% to $5,762 billion. Of this amount, $3,851 billion worth of assets were managed in Hong Kong and 77.9% of these assets were invested in Asia.
Other private banking business increased by 1.5% to $2,263 billion in 2011.
Fund advisory business dropped by 3.1% to $889 billion in 2011.
The market capitalisation of SFC-authorized REITs recorded a growth of approximately 20.4% to $124 billion in 2011.
The FMAS report notes that the SFC has continued to monitor closely regulatory compliance of investment products. Following the rollout of the enhanced regulatory regime, the SFC also gave the industry guidance on the quality of disclosures based on findings of the surveillance exercise on retail offering documents. Furthermore, the SFC strengthened its partnership with the Mainland and fortified its role in the process of renminbi internationalisation by expanding the range of renminbi products.
“The SFC will continue to maintain close dialogues with the Hong Kong Government, the Mainland regulatory authorities and other relevant regulators to further promote the development of offshore renminbi investment products in Hong Kong with a view to anchoring Hong Kong’s role as an offshore renminbi centre,” Mrs Lam added.
The FMAS has been conducted annually since 1999 to help the SFC assess the industry’s state of affairs for policy setting and operations planning. This year, a total of 409 entities responded to the survey on a voluntary basis. They included 351 licensed asset management and fund advisory houses, 39 registered financial institutions and 19 insurance companies (Note 3).
1. The term refers to the overall value of assets reported in the sub-sectors of asset management, fund advisory, private banking (broadly categorised as non-REIT fund management business) as well as SFC-authorized REITs.
2. Unless stated otherwise, the values given are in Hong Kong dollars.
3. Respondents fall into these categories: 1) asset management and fund advisory companies licensed under section 116 or 117 of the Securities and Futures Ordinance (SFO); 2) registered institutions under section 119 of the SFO, which are authorized financial institutions as defined in section 2(1) of the Banking Ordinance (Chapter 155); and 3) insurance companies registered under the Insurance Companies Ordinance (Chapter 41) providing long-term business.
4. Please see appendices for some key findings of the report.