Hong Kong tax overhaul may attract more fund managers: KPMG
Hong Kong’s changes to its fund tax exemption and carried interest rules are expected to draw more regional and global asset managers to the city, according to KPMG’s latest Hong Kong Asset Management and Private Equity Outlook.
The Securities and Futures Commission’s (SFC) latest Asset and Wealth Management Activities Survey showed total assets under management rose 20% in 2025 to a record high.
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Net fund inflows during the year climbed 193%.
The survey also showed that 56% of assets managed in Hong Kong were invested outside the Chinese Mainland and Hong Kong SAR.
KPMG said the revised Unified Fund Exemption regime addresses a legal certainty issue that had previously pushed parts of the alternatives sector towards other markets.
The firm described the reform in its report as the most significant tax development in a generation.
Under the updated framework, qualifying carried interest and performance fees will face a 0% effective tax rate at both the corporate level and for Hong Kong-based employees.
The incentive will also apply retrospectively from the 2025 assessment year.
KPMG said this gives Hong Kong a competitive edge that other jurisdictions do not currently offer.
The report also pointed to stronger momentum in the city’s capital markets.
Hong Kong reclaimed the top spot globally for IPO fundraising in 2025 and has continued to perform strongly in 2026, ranking among the top two markets so far this year.
KPMG forecast full-year IPO fundraising of about HKD350bn ($44.6bn).
Exchange-traded funds were identified as another growth area for the asset management industry.
Average daily ETF turnover in the first six months of 2026 reached HKD39.6bn, up 17% from the same period last year.
KPMG said the market could expand further as investor demand shifts beyond traditional passive index products.
The report highlighted growing interest in active strategies, income generation, thematic exposure, virtual assets and tactical trading products.
It said this change in product mix could improve market liquidity, widen investor choice and create new distribution opportunities for regional and global asset managers.
Darren Bowdern, head of alternative investments, Hong Kong SAR, KPMG China, said: “By offering a retrospective 0% effective tax rate on both carry and performance fees, Hong Kong has eliminated the operational ambiguities that historically hindered private equity, credit, and hedge fund structures locally.
“We anticipate strong immediate interest from global asset managers looking to build permanent investment teams and oversee high-value Asian portfolios from Hong Kong.”
