The Securities and Futures Commission’s annual Fund Management Activities Survey, 2011, found the combined fund management business of Hong Kong recorded a year-on-year decline of 10.4%, bringing the total AUM down from HK$10trn (£810bn, US$1.2trn) in 2010 to HK$9trn at the end of 2011.
It will clearly be a disappointing result for the jurisdiction which had recouped the near 40% fall in AUM suffered in 2008. Indeed, 2009 saw AUM rise 45%, while it added a further 18% in 2010 – taking the total AUM of fund managers in Hong Kong to HK$10trn.
The SFC said the decline is in line with expectations. Specifically, it highlighted the 2011 Market Highlights report issued by the World Federation of Exchanges, which found the broad equity market indices of its member exchanges dropped by an average of 13.6% in US dollar terms during last year, with the Asia-Pacific region experiencing the largest decline of 20.1%.
Despite the fall in total AUM, the SFC was upbeat about the progress the jurisdiction has made to position itself, with the support of the Chinese government, as the main hub for international trade of renminbi-denominated products.
In April 2011, Hong Kong made the world’s first listing and initial public offering of a renminbi-denominated REIT. Since then, 19 unlisted renminbi Qualified Foreign Institutional Investor (RQFII) funds have been authorised by the SFC for offer to the public, following the rollout of the RQFII pilot scheme by the Mainland Chinese government in December 2011.
These RQFII funds, managed by the Hong Kong subsidiaries of qualified Mainland fund managers and securities companies, channelled renminbi raised in Hong Kong to the Mainland to invest directly in the Mainland bond and equity markets.
January this year also saw the world’s first listing of a renminbi-denominated and traded gold exchange-traded fund by the SFC, which was also the first renminbi ETF in Hong Kong.
In the report, the regulator said: “The SFC has been working closely with the HKSAR government to facilitate the implementation of these initiatives while maintaining regular dialogues with Mainland financial regulators, anchoring Hong Kong’s role as the renminbi continued to venture outside the Mainland’s borders.”
Increase in licences
In contrast to the fall in assets under management, the number of individuals and companies licensed for asset management in Hong Kong rose steadily during 2011. According to stats from the SFC, the number of licensed corporations and individuals grew by 5.5% and 12.8% respectively, meaning at the end of 2011, 842 corporations and 6,184 individuals were licensed.
This compares with 798 corporations and 5,483 individuals at the end of 2010.
As an interesting aside, the survey also revealed the number of people working within sales and marketing functions for fund management businesses outnumbered other employees, including trading, admin and research, by around 80%.