FAMILY OFFICE PUSH BY HONG KONG ‘PAYING OFF’
Tax breaks and favourable immigration policies have piqued interest of tycoons, especially those from the mainland and SE Asia, top banker says
The tax breaks and immigration policies unveiled by the Hong Kong government to attract tycoons to set up family offices have been quite successful, as they have piqued the interest of many billionaires over the past year, according to a top banker.
“Hong Kong has a lot of viable reasons for people looking to set up family offices here, ranging from flexible regulations and immigration policies to low tax rates and active capital markets,” Paul Knox, managing director and senior wealth adviser at JPMorgan Private Bank Asia, said in an exclusive interview with the Post.
Most of the interest was from the bank’s mainland and Southeast Asian clients, but inquiries from other parts of the world were also rising, he added.
The government in March last year introduced eight measures to entice billionaires to set up family offices for undertaking investment, philanthropy and succession planning. This was followed by a range of tax incentives in May and the setting up of the Hong Kong Academy for Wealth Legacy in November.
It also unveiled a revamped investment migration programme in March this year, which was designed to provide residency to those who invest HK$30 million or more.
Tax and regulatory environments are the key considerations for wealthy clients when it comes to choosing a destination to set up family offices, according to a recent study by JPMorgan Private Bank Asia.
“Hong Kong scores well on both counts as the city has flexible regulations and tax incentives,” Knox said.
Another report from JPMorgan Private Bank earlier this year, which surveyed 190 family offices worldwide with an average net worth of US$1.4 billion, found they were more willing to take higher risks to achieve greater long-term returns.
On average, they invest 45 per cent in alternative assets such as private equity and hedge funds, targeting a return of at least 11 per cent, according to the report. They also invest in traditional investment vehicles, with 26 per cent in publicly listed companies and 20 per cent in fixed income and cash.
“Hong Kong is able to attract family offices as the city’s role as an international financial centre provides access to opportunities across markets and asset classes,” Knox said.
The report found almost 80 per cent of global family offices were working with external investment advisers to diversify their portfolios, which made Hong Kong a highly attractive destination, given its large pool of investment professionals.
Knox said JPMorgan Private Bank, with operations in 100 markets globally, could assist high-net-worth individuals based in Hong Kong and elsewhere to diversify their investments in different asset classes and markets.
Looking ahead, Knox hopes the government will launch new initiatives linked to philanthropy and family governance.
“Our regional family office client survey reveals that, after growing assets for future generations, the second-most important goal is leaving a legacy through philanthropic efforts,” he said.
“They also feel they need to do more in family governance to have more sophisticated structures to mitigate risks and have better succession planning.”
Family offices also like to outsource some functions to cut operating costs. Some large family offices with more than US$1 billion in assets under management had an average annual operating cost of US$6.1 million, the report found.