KPMG: Major reform expected for Hong Kong fund tax system, likely to attract a new wave of global asset management companies to establish a presence.

On July 22, KPMG released its latest "Hong Kong Asset Management and Private Equity Outlook" report, pointing out that the reforms of the fund tax exemption system and the accompanying tax reduction system are expected to attract a new wave of regional and global asset management companies to establish in Hong Kong. The latest "Asset and Wealth Management Activities Survey" released by the Securities and Futures Commission indicates that by 2025, Hong Kong's managed assets will increase by 20% year-on-year to a historical high, with net fund inflows surging by 193% year-on-year, about three times that of last year. Of the assets managed in Hong Kong, 56% are invested in overseas markets outside of China and Hong Kong, reflecting Hong Kong's continued position as an international asset allocation center. KPMG forecasts that Hong Kong's annual IPO fundraising amount is expected to reach approximately HK$350 billion. The Hong Kong capital market is also showing strong momentum. Hong Kong reclaims the top spot in global initial public offerings (IPO) fundraising in 2025, and this upward trend continues into 2026, with the fundraising amount currently ranked among the top two globally. The report also points out that ETFs will become an important growth engine for Hong Kong's asset management industry, with the average daily trading volume of Hong Kong ETFs reaching HK$39.6 billion in the first half of this year, a 17% increase from the same period last year. Darren Bowdern, Head of Alternative Investments at KPMG China Hong Kong Special Administrative Region, stated that by providing a 0% actual tax rate with retroactive traceability for carried interest and performance fees, Hong Kong further eliminates uncertainties in the current tax system and enhances the attractiveness of setting up and operating investment platforms in Hong Kong for private equity, private credit, and hedge funds. It is expected that these measures will attract more international asset management institutions to establish long-term investment teams in Hong Kong and use Hong Kong as an important base for managing high-value investment portfolios in Asia. The report indicates that as investor demand expands from traditional passive index products to active strategies, income-oriented products, thematic investments, virtual assets, and tactical trading products, the ETF market will continue to expand. The increasing diversification of products not only helps to enhance market liquidity and expand investor choices, but also brings more product distribution and business development opportunities for global and regional asset management companies.