BlackRock set to launch more Hong Kong-domiciled funds
BlackRock, the world's largest fund company by assets, plans to launch more Hong Kong-domiciled funds as part of a deeper push into Asia.
The move fits with the government's aims of promoting the city as "a world factory" for the funds industry.
"We would like to domicile our funds in Hong Kong because we consider Hong Kong, and Asia as a whole, as very important markets. Hong Kong is a great city to do business in, as it is the most ideal city to enter mainland China," Mark McCombe, Blackrock's Asia-Pacific chairman, told the South China Morning Post in an exclusive interview.
While McCombe did not provide any timing on the new Hong Kong-domiciled funds, he said the firm was planning to launch them and would seek approval from the Securities and Futures Commission.
BlackRock, based in the US but offering fund products globally, has most of its funds domiciled in European cities such as Luxembourg and Dublin.
This is in line with the practice of other international fund houses. Although many use Hong Kong to sell fund products across Asia, most such funds were not domiciled in the city. Of the 1,700 or so authorised funds in the city, only about 300 are Hong Kong-domiciled, partly due to structural and tax issues.
McCombe said companies liked to locate their funds in Dublin or Luxembourg as these funds could be sold globally in many markets. But he said those funds that were tailored for Hong Kong or mainland investors, such as mid-cap Hong Kong stock funds, would be best suited to be in the city.
The firm already has 14 exchange-traded funds domiciled in Hong Kong.
"We are interested in introducing more Hong Kong-domiciled mutual funds to show our commitment to Hong Kong and to attract more investors in the region," he said.
BlackRock's interest in boosting its use of Hong Kong dovetails with proposals announced in the February budget to make the city a "world fund factory".
Financial Secretary John Tsang Chun-wah said in his budget speech that the government would propose law changes to extend profit tax exemptions to offshore private equity funds. He also wants to allow Hong Kong funds to set up as open-ended investment firms instead of trusts, as required under existing rules.
In addition, Tsang said, the government was in talks with mainland authorities on the cross-border selling of funds, meaning Hong Kong-domiciled funds could be sold on the mainland and mainland funds could be sold in Hong Kong.
"These proposals would definitely help enhance Hong Kong's attractiveness to the international fund companies," McCombe said. Allowing Hong Kong-domiciled funds to be sold in the mainland was particularly attractive, he said.
McCombe also said he was expanding his investment team in the city to trade Hong Kong stocks for BlackRock's global funds.