Significant reforms to Hong Kong's fund tax regime and carried interest tax concessions are expected to draw a fresh wave of regional and global asset management firms to establish operations in the city.
According to the latest Asset and Wealth Management Activities Survey from the Securities and Futures Commission, Hong Kong's assets under management (AUM) reached a historic high in 2025, marking a 20% year-on-year increase. Net fund inflows for the year surged by 193%, approximately triple the previous year's figure. Of the assets managed in Hong Kong, 56% are invested in overseas markets outside mainland China and Hong Kong, underscoring the city's enduring role as a hub for international asset allocation.
KPMG projects that Hong Kong's total IPO fundraising for the year could reach around HKD 350 billion. The city's capital markets are also demonstrating robust momentum, with Hong Kong reclaiming the top spot for global IPO fundraising in 2025 and maintaining this strong performance into 2026, currently holding a position within the top two globally.
KPMG's report further highlights that ETFs are set to become a key growth driver for Hong Kong's asset management industry. In the first half of this year, the average daily turnover for Hong Kong-listed ETFs reached HKD 39.6 billion, a 17% increase compared to the same period last year.
Darren Bowdern, Partner and Head of Alternative Investments for KPMG China in Hong Kong, stated that by offering a 0% effective tax rate with retrospective effect on carried interest and performance fees, Hong Kong is further eliminating uncertainties within the current tax system. This move enhances the attractiveness for private equity, private credit, and hedge funds to set up and operate investment platforms in the city. It is anticipated that these measures will attract more international asset management institutions to establish long-term investment teams in Hong Kong, utilizing it as a key base for managing high-value Asian investment portfolios.
The report indicates that as investor demand expands from traditional passive index products to include active strategies, yield-generating products, thematic investments, virtual assets, and tactical trading products, the ETF market will continue to grow. This increasing diversification of product types not only helps improve market liquidity and broaden investor choice but also presents more product distribution and business development opportunities for global and regional asset management companies.
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