Hong Kong’s cash residency scheme could attract more family offices as it competes with Singapore, industry players say

Hong Kong’s investment-migration scheme has attracted the attention of many wealthy families from mainland China and Asia, who are considering setting up family offices in the city, according to industry players.

Chief Executive John Lee Ka-chiu proposed a revamped investment migration program for wealthy people and their families during his annual policy address in October, offering fast-track residency for at least HK$30 million (US$3.8 million) investments in local shares or other assets.

“The upcoming capital investment scheme will be very important in attracting wealthy clients to set up family offices in Hong Kong,” said Victor Ai Kuiyu, chief executive of Hong Kong-listed financial firm DL Holdings. “We have seen many customers interested in moving to Hong Kong through this scheme because it is very simple and easy.”

Details and exact launch date of the Capital Investment Entry Scheme (CIES) will be announced by the end of this month. The scheme, along with a tax break introduced in May and other incentives such as the creation of art storage facilities at Hong Kong airport, is part of Lee’s pledge to attract another 200 family offices on top of the more than 400 already created here.

Chief executive John Lee proposed a revamped investment migration program for wealthy people and their families during his annual policy address in October. Photo: Edmond So

The target seems reasonable, as the number of US dollar millionaires in Asia is expected to reach 76 million by the end of the decade from around 30 million currently, according to a report by HSBC last December.

Ai said his company is ready to serve prospective clients who want to apply for CIES. DL Holdings has signed an initial agreement for a possible US$10 million acquisition of an artificial intelligence company to offer services tailored to family offices.

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The company, with more than $4 billion in assets under management, has been offering asset management services to family offices for more than 13 years, serving more than 50 family offices.

The Hong Kong-headquartered company also has operations in Singapore, where it also offers similar investment migration services.

“The family office pie is so large that both Hong Kong and Singapore could potentially see huge growth in this sector,” Ai said.

Ai said he would advise clients to focus on Hong Kong as the city has a much more active stock market. “For very wealthy mainland clients who want to diversify their investments, Hong Kong is the first choice,” he said.

Total assets under management in the city reached US$4.55 trillion last year, according to government figures.

Victory Securities CEO Katerina Ku says the revamped CIES is likely to be popular. Photo: Jonathan Wong

Katerina Kou, chief executive of investment manager Victory Securities, said many of the company’s clients, mostly from mainland China, had expressed interest in the revamped CIES.

Hong Kong initially introduced CIES after the SARS (severe acute respiratory syndrome) outbreak in 2003, but discontinued it in 2015 due to speculation in the property market.

Meanwhile, Singapore has strengthened its reputation as a family office hub, with the number of family offices rising to 700 in 2021 from 400 in 2020 due to favorable incentives offered by the city’s government, according to the latest government data.

“We helped many clients invest when CIES first started,” said Ku. “We believe the revised scheme will also be popular as many wealthy families from mainland China and Asia would like to invest and live in Hong Kong.”

She said as the scheme brings in more capital, it will help support the capital market and lead to more business for local brokerages.

“Once a client registers for CIES with a brokerage, the broker will handle the investment and reporting requirements for the next seven years until they get their residency,” she said.

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Cameron Harvey, chief executive of Landmark Family Office, a multifamily office operator that launched in January, said CIES could be a smart and sensible tool in the Hong Kong government’s arsenal.

If used effectively, it can easily help preserve wealth in Hong Kong in the long run.

“It’s easy to use without necessarily requiring expensive legal and tax advice,” Harvey said, citing his experience in other jurisdictions. “A great tool that we have used many times for our clients over the years.”

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