Hong Kong's Future Fund to set up tech investment pool

An additional HKD 5bn will seed a separate fund with a mandate to focus on the Greater Bay Area (GBA), Paul Chan, Hong Kong’s financial secretary, said in his 2022-2023 budget statement.

The strategic tech fund is part of the Hong Kong Growth Portfolio (HKGP), announced two years ago as a 10% allocation within the Future Fund for investments that support the local economy. Since then, governance and investment committees have been set up to oversee the HKGP and eight private equity firms have been appointed – but not publicly named – to deploy the capital.

Chan said he would invite HKSTPC, an incubator under Hong Kong Science & Technology Park, and Cyberport, which also incubates and supports the development of start-ups, to identify potential investees for the strategic tech fund.

“Over the past few years, we have witnessed a rapid growth in the total number and amount of fundings attracted by park companies, indicating a growing appetite to invest in local I&T [innovation and technology] start-ups,” said Sunny Chai, chairman of HKSTP, in a statement.

“At the same time, we will capitalise on the opportunities presented by the National 14th Five-Year Plan, supporting tech ventures to go global and attract foreign investment, as well as enriching the talent pool and I&T ecosystem in Hong Kong and the GBA.”

Future Fund was established in 2016 to invest budget surpluses to cover future liabilities arising from an ageing population and slower economic growth. It was seeded using HKD 219.7bn generated from government land sales. With a portion of annual budget surpluses to be contributed as periodic top-ups, the goal was to create a pool of HKD 510bn by 2023-2024.

It now has HKD 319.7bn in assets, reflecting an increase in the size of the land fund and an injection of HKD 4.8bn from the 2016-2017 surplus.

The Future Fund is held within the Hong Kong Monetary Authority’s (HKMA) Exchange Fund, which is tasked with affecting the exchange value of the Hong Kong dollar to maintain monetary and financial system stability. The Future Fund is split 40-60 between the Exchange Fund’s bond and equities-focused investment portfolio and the private equity-heavy long-term growth portfolio (LTGP).

As of year-end 2020, the Exchange Fund had HKD 4.5trn in assets and the LTGP had a market value of HKD 406.4bn. Of this, HKD 299.7bn was in private equity and HKD 106.7bn was in real estate. The annualized IRR on the LTGP since its inception in 2009 was 13.7%.

Separately, Lam elaborated on plans to encourage family offices to establish a presence in Hong Kong. Tax concessions for “eligible family investment management entities managed by single-family offices” are expected to come into effect for the 2022-2023 financial year.

Chan added that this would “deepen Hong Kong’s pool of liquidity and create more business opportunities for the financial sector and other professional sectors.”

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• Topics
• Greater China
• LPs
• Technology
• Fundraising
• Growth
• Hong Kong (China)
• Hong Kong Monetary Authority (HKMA)
• Direct investment