29th April 2024 – (Hong Kong) As fortunes amass across Asia’s economic powerhouses, a discreet race is unfolding between Hong Kong and Singapore to become the region’s preeminent haven for the ultra-wealthy to park their riches. And if the latest figures are any indication, the former British colony is gaining the upper hand.
According to a landmark study released this week, Hong Kong was home to an estimated 2,703 single-family offices at the end of 2023 – nearly double Singapore’s 1,400 such private investment vehicles overseen by the city-state’s regulators. While Singapore remains a formidable wealth management centre attracting billion-dollar fortunes from around the globe, Hong Kong’s ascent underscores its growing appeal to the world’s burgeoning crop of ultra-high-net-worth clans.
The study, conducted by professional services firm Deloitte in collaboration with the government’s InvestHK team, adopted a sophisticated econometric model drawing on a database of over 200,000 ultra-affluent individuals and families to arrive at its Hong Kong estimate. It represents the most comprehensive snapshot yet of the city’s flourishing family office landscape – a sphere that has largely operated underneath the radar despite its mounting influence over regional capital flows.
As the figures crystallise just how pivotal Hong Kong has become as a magnet for dynastic riches, they coincide with an emphatic pivot by the territory’s leaders to double down on luring more of the world’s wealth through an array of new incentives and marketing blitzes. Chief Executive John Lee has explicitly targeted the addition of 200 new family offices by 2025, backed by an armada of tax concessions, investment schemes, and bespoke residency pathways catering to the supreme ultra-rich.
“Hong Kong’s capital markets, its proximity to the mainland China market, the rise of digital technology, and the untapped potential of emerging markets in Asia” have converged to make the city a premier global family office hub, according to Rita Chan, Deloitte’s leader for the Hong Kong government and public services practice. Chan, whose team oversaw the landmark study, noted Hong Kong’s intrinsic flexibility as a key allure for the professional teams managing billion-dollar fortunes.
Long established as a nexus for cross-border private banking, Hong Kong’s appeal has markedly broadened in the post-pandemic era towards the specialised sphere of managing and investing the liquid assets of ultra-high-net-worth families. In addition to mainland Chinese clans, the territory has drawn a growing number of family offices from further afield, including from the Middle East.
Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury Bureau emphasised that the bevy of new measures introduced over the past year have enhanced the city’s “holistic offerings for global wealth owners.” These enticements span preferential tax regimes, cutting-edge investment schemes harnessing the city’s capital markets, and bespoke residency pathways for foreign ultra-rich seeking a foothold.
Yet Hong Kong authorities realise that having crossed the threshold of over 2,700 single-family offices prowling the territory’s investment spaces, complacency could squander their hard-won lead over Singapore and other upstart family office magnets in the Middle East and Europe. Rather than standing pat, the former British colony is poised to double down on reforms cementing its credentials as the world’s premier dynastic wealth hub.
High on the agenda for the coming year, according to Anthony Lau, Hong Kong leader of Deloitte Private, is a further expansion of the city’s competitive tax regime governing family offices. The professional services firm is advocating a trimming of the 16.5% profits tax rate currently levied on eligible family offices to just 8.25%. This move would harmonize taxation with private equity funds and ensure Hong Kong remains alluring relative to jurisdictions dangling lower tax rates.
Further enhancing Hong Kong’s appeal would be broadening the universe of “qualifying assets” under the family office tax concessions to include investments in artworks, digital assets, and other non-traditional domains that have become stamps of ultra-wealth in the modern age. Just as critically, inducements like abolishing the 5% ceiling on incidental trading gains would better align the city’s framework with the realities of how modern family offices source returns across currencies, asset classes, and borders.
While critics may bemoan such reforms as tailoring Hong Kong’s financial regime ever more narrowly for the stratospheric 0.01%, advocates counter that robust family office ecosystems catalyze far broader economic impacts. Beyond employing armies of lawyers, accountants, investment advisors and back-office staff, family offices serve as fertile hunting grounds for private capital seeking out fledgling businesses and investing in dynamic new ventures.
“Family offices are a major engine for venture and growth capital across the city’s most vibrant knowledge-based industries,” notes Duncan Abate, Hong Kong-based head of the Asia fund finance practice at McCabes Law Firm. “From biotech and fintech to green energy and AI, these private investment vehicles are dominant financiers of Hong Kong’s evolving sectors of the future.”
Indeed, the confluence of family office capital, the territory’s world-class capital markets and its deep bench of financial and legal talent have conspired to make Hong Kong a premier launchpad for innovative startups and venture dealmaking. To reinforce these catalytic advantages, the Hong Kong government has rolled out an array of initiatives over the past year cultivating end-to-end support for family offices.
One new program clinched in the latest 2024 budget establishes a dedicated public investment portfolio bankrolled by the HK$3 million fee paid by each foreign ultra-rich individual granted a residency visa through the Capital Investment Entrant Scheme. Capped at $10 million per applicant, these mandatory contributions will pool into a sovereign wealth fund allocating capital to vetted Hong Kong-based project companies in technology, fintech, biotechnology and other cutting-edge sectors.
The portfolio, whose underlying holdings remain undisclosed, is designed to provide accredited family offices access to a “managed pipeline of investable local opportunities spanning concept funds to later-stage growth capital,” according to government officials. Equity stakes in larger companies could follow as the program matures, allowing foreign dynasties approved for Hong Kong residency to co-invest alongside the public fund in pre-vetted local enterprises.
Collectively, programs like the public investment portfolio form a virtuous ecosystem luring more family offices to Hong Kong, whose presence then feeds demand for skilled talent, specialized services and knowledge-intensive innovation. It’s a cycle policymakers hope can perpetuate despite competition from lower-tax jurisdictions in the Middle East and Europe.
While Hong Kong’s 16.5% tax rate on eligible family office income is no pittance, advocates note the city punches above its weight in talent depth, regional market access, and business connectivity. Luring these intangible assets isn’t just about racing Singapore to the bottom in crafting a tax haven.
“A family office settles in Hong Kong with the understanding it will embed itself in one of the world’s deepest talent pools for financial services, private banking, fund management and legal services,” says tax attorney Dylan Raine, a partner at Baker Donald’s Hong Kong office. “The city offers peerless opportunities to access the fastest-growing markets globally.”
At the highest rungs of the wealth spectrum, taxation remains a secondary concern to issues of institutional stability, asset protection, security and residency flexibility, Raine and other advisors note. By deftly leveraging its anchor as Asia’s decades-old wealth hub while evolving its family office enablers, Hong Kong is entrenching itself as a multi-generational vaulting ground for the world’s dynasties.
On display at Hong Kong’s ritziest enclaves and private clubs is a surge of investments from foreign ultra-high-net-worth families establishing beachheads in the city to pursue passion projects from philanthropy to art collections and impact investing. In some ways, the allure of Hong Kong as a gateway into Asia’s development arc mirrors how America’s Gilded Age fortunes leveraged New York as a base for empire-building on a global scale.
Take the family of Francois-Henri Pinault, chairman of the Kering luxury group that owns brands like Gucci, Saint Laurent and Balenciaga. Pinault Family Holding recently opened an outpost in Hong Kong to scout investments in brands, technologies and lifestyle projects attuned to evolving Asian youth culture and consumption trends. More than an investment office, the family’s local base in Hong Kong melds components of a cultural incubator, startup accelerator and creative studio.
Then there’s the burgeoning crop of legendary hedge fund clans like Citadel’s Griffins, D1 Capital’s Redlers, and Marshall Wace’s Marshalls establishing significant bases in Hong Kong to capitalise on Asia’s talent trove while channelling fortunes to local passion plays in entertainment, real estate and high-end service offerings. While Asia’s richest like Jack Ma and Zhang Yiming already well ensconced in private family offices, new wealth is flowing rapidly with founders of unicorns like Tencent-backed Kuaishou considering basing such vehicles in Hong Kong.
Helping facilitate this influx of new family offices in Hong Kong is the city’s revitalized team at InvestHK, a public-private partnership deploying over 30 staffers solely focused on recruiting and advising ultra-high-net-worth individuals on establishing local bases. Unlike Singapore, where oversight falls to the city-state’s central bank, Hong Kong’s family office promotion squad operates as a dedicated concierge shepherding billionaire clans through every logistical and regulatory need – spanning immigration, residency and tax structuring.
“Hong Kong has ample scope for our family office to pursue a wide array of investment themes across sectors like technology, real estate and asset management while remaining plugged into the Greater Bay Area’s growth,” says Neel Raheem of the Dubai-based Jumeirah Family Office, which manages over $2 billion in assets. Jumeirah is poised to launch its Hong Kong branch imminently after committing over $600 million in initial capital for regional investments and operations.
“Compared to centres like Singapore, the ecosystem being cultivated in Hong Kong is incredibly dynamic, open and opportunity-rich,” Raheem adds. “For ultra-high-net-worth families harbouring inter-generational ambitions, Hong Kong provides the ideal platform to build investment vehicles accessing some of the globe’s most compelling growth markets.”
To be sure, there remain obstacles for Hong Kong as it strives to entrench its dynastic wealth magnet status. Home prices in the territory remain among the world’s priciest, forcing global families to navigate chronic shortages in luxury housing stock for their local offices and staff. Meanwhile, even with the government’s streamlined pathways, securing coveted Hong Kong residency rights remains a protracted and opaque process for many ultra-wealthy clans.
Security anxieties also persist for some Middle Eastern and Western families mulling Hong Kong’s presences, given mainland China’s militaristic posturing towards Taiwan and its stepped-up suppression of civil liberties under the National Security Law.
Yet Hong Kong’s champions still hold a powerful trump card: The city remains an oasis of transparency, rule of law, and institutional coherence buffered from the unpredictable dictates of authoritarian fiat descending from Beijing. For now, that fragile balance of embedded Western institutional influences and physical-political proximity to the mainland Chinese juggernaut remains the elusive sweet spot most coveted by clan dynasties with third, fourth and fifth-generational ambitions.
Singapore – with its managerial efficiency and cosmopolitan veneer – beckons as an enviable redoubt for private wealth. Yet its more politically regimented society, and perhaps most critically, its simmering territorial and maritime frictions with China and Malaysia, detract from its generational staying power as family office Eden.
In contrast, Hong Kong’s unique formula tying liberal Western civil traditions and judicial autonomy with physical immediacy to the mainland’s economic ascent has few parallels in catering to the world’s ultra-high-net-worth aristocracy. As billionaire clans of the 21st century converge on the city to pursue legacies spanning investments, innovation and philanthropy, Hong Kong now stands apart as the preeminent sanctuary for multi-generational capital.
“The decisive role of Hong Kong is to provide global families the regulatory and legal certitude only a commonwealth jurisdiction can assure, matched with unrivalled investment connectivity to China and emerging Asian markets,” sums Patrick Yip, Deloitte’s vice-chair for China. “It’s a positioning few other jurisdictions can match.”
The surge of family office arrivals may be new, but Hong Kong’s role as a vault for the world’s hyper-affluent harks back centuries. As Yip notes with a wink, “In safeguarding portable fortunes since the Opium Wars, Hong Kong is simply reverting to form.”
