HKUST and EY Jointly Publish the Landscape of Family Offices in Greater China Report 2024

Hong Kong University of Science and Technology (HKUST) Roger King Center for Asian Family Business and Family Office (“the Center”) and EY Family Enterprise team (“EY”) today announced the publication of the Landscape of Family Offices in Greater China Report 2024 [1] (the “Report”). Combining academic research and industry expertise, the report provides a comprehensive and insightful analysis of the family office landscape in Greater China. Findings in the report suggest that Chinese mainland families are the primary driving force behind the development of family offices in Hong Kong and that attracting Chinese mainland families is to be focalized. 

Jasmine Lee, EY Hong Kong and Macau Managing Partner, says: “The Hong Kong Special Administrative Region government's (“HKSAR government”) objective is to attract no less than 200 family offices to establish or expand operations in Hong Kong by the end of 2025. The Policy Statement on Developing Family Office Businesses in Hong Kong announced in March 2023 sets out the Government's policy stance and measures on developing a vibrant ecosystem for global family offices and asset owners. With gradual implementation, it has also proven the Government’s commitment in providing a good operating environment and establishing a complete ecosystem for family offices. These actions, on top of the well-established financial and legal systems, will further boost the confidence of families in setting up their family offices in Hong Kong.” 

Professor Winnie Qian Peng, Director of Roger King Center for Asian Family Business and Family Office, HKUST Business School, says: “The Landscape of Family Offices in Greater China Report 2024 provides an in-depth understanding of the evolving family office landscape in the Greater China. Hong Kong, besides attracting an increasing number of young family offices in recent years, is in fact the birthplace for most of the matured family offices in Asia. Our report indicates that these family offices do not just focus on wealth management. They are quite flexible and long-term oriented. They pay more attention on preservation of family values and creating greater social impact throughout generations. They nurture the next generation to become responsible future leaders, who are passionate about impact investing and philanthropy. Furthermore, these family offices also set good examples for the newly established family offices in Hong Kong. Hong Kong is gradually developing into a matured and complete ecosystem for family offices, making it a key driving force for the development of family offices in the Greater China region.”

Current status of family offices in Greater China

Results of our survey indicate that approximately 42% of SFO founders are from the Chinese mainland, significantly higher than the 29% originated from Hong Kong, suggesting that Chinese mainland families are the primary driving force behind the development of family offices in Greater China. Among all the SFO respondents in this question, around 51% had offices in Hong Kong, while approximately 24% had offices in the Chinese mainland. 14% and 11% of respondents reported having offices in Singapore or other regions respectively.

Hong Kong is home to most of the mature family offices, with 37% of SFOs in the region have been operating for over a decade. The generational spread among leaders of Hong Kong SFOs ranges from first to fourth generations. Contrastingly, all SFOs in the Chinese mainland have been established for less than ten years, with leadership primarily stemming from first and second generations. The disparity in SFO maturity levels reflects the different stages of economic development and wealth accumulation between the two regions. Hong Kong SFOs are managed by a combination of old and new wealth, boasting a diverse range of generational leadership. Chinese mainland SFOs are conversely primarily comprised of new wealth SFOs, with a relatively smaller generational spread in leadership. The vast population and family wealth in the Chinese mainland are the primary driving force behind the development of the overall family office scene in Greater China, while the experience and expertise of Hong Kong family offices should prove valuable to their counterparts. 

Highly favored locations for investment assets among our respondents are the Chinese mainland and Hong Kong, with each accounting for 21% of the responses, followed by North America and Europe. These results suggest that the respondents prefer to actively diversify their investment risks by allocating assets to different geographical locations. The growing trend of establishing multi-location SFOs also reflects the demand for families to access specialized services and expertise across various markets and jurisdictions.

SFOs serve as comprehensive platforms that offer financial and compliance-related services, as well as non-financial services, while MFOs tend to have a stronger focus on financial services. Findings reveal that SFOs offer a comprehensive range of products and services that cater to address both financial investments and family-related matters for client families. Family governance is among the top three services provided by SFOs. Through the establishment of formal structures and processes for family governance, SFOs can effectively facilitate decision-making, communication and conflict resolution among family members, while preserving their legacy and values.

Potential SFO users

78% of respondents expressing interest in setting up an SFO are located in the Chinese mainland. 40% of the respondents chose Hong Kong as their top preferred location for setting up family offices. Hong Kong, with its status of an international financial hub, its availability of professional talent, favorable tax regime and extensive experience in operating family offices, provides benefits that attract Chinese mainland families to establish family offices beyond their borders. The report points out that attracting Chinese mainland families is a particular focus for the Hong Kong family office scene. The Chinese mainland and Hong Kong are the most popular locations among both potential SFO users or MFOs users interested in setting up their own SFOs. Wealth preservation and growth and preservation of family harmony are the top reasons of considerations, while the lack of guidance or knowledge and recruiting trustworthy external talents are identified as the key challenges in establishing SFOs. 

Results found that around 40% of MFO family respondents are interested in setting up their own SFO, suggesting that MFOs could be testing grounds for families who just began their family office, with the goal of ultimately setting up their own SFOs. 

Social impact

Approximately 60% of SFOs have allocated less than 10% of their total investments to impact investment, while approximately 22% have allocated over 20%. These results suggest that while impact investment is acknowledged and embraced by SFOs, its integration into their portfolios is still at a nascent stage. 

Nevertheless, the increasing interest and active engagement in impact investing demonstrate the growing awareness and dedication of families toward addressing social and environmental challenges through their investment. 84% of SFOs in Greater China have engaged in philanthropic activities. Within this group, approximately half have established private foundations, charitable trusts, or donor-advised funds (DAFs), while others engage in strategic philanthropy and make direct monetary donations. Interestingly, 69% of SFOs have family members actively involved in philanthropy, extending beyond the involvement of just the founder of the family office individually. This observation indicates that family philanthropy is perceived not only as a means to give back to society but also as a valuable way to foster stronger bonds among family members.

Policy formulation

The concept of a family office gained traction in the Chinese mainland in the early 2010s. Since then, the rapid growth of wealth in the region has fostered the flourishing of family offices in Greater China. To provide a comprehensive picture of family offices in Greater China, the report distinguishes itself by designing three sets of specific questionnaires tailored to the three distinct groups of family offices: SFOs, MFOs and potential SFO users. Moreover, the report is the first in the region to conduct a comparative analysis of the characteristics of family offices in Hong Kong and the Chinese mainland, while also making comparisons across the three family office segments. 

The survey was distributed to the collaborating families and institutions of the Center, clients of EY Family Enterprise, collaborating institutions of InvestHK of the HKSAR government, members and collaborating institutions of Family Office Association Hong Kong (FOAHK), and clients and collaborating institutions of China CITIC Bank, representing a broad perspective of family offices in the region. From August 2022 to August 2023, data was collected from 160 respondents, including founders, leaders, senior management and family members associated with family offices. 

Karina Wong, EY Greater China Business Tax Services Leader, Private Tax Co-leader and Family Enterprise Leader, says: “The findings presented in this report carry significant implications for the development of family offices in the Greater China region, impacting various stakeholder groups. For families that have recently accumulated wealth, this report offers a valuable roadmap for establishing prospective family offices, especially within the Greater China region. From a policy perspective, the insights provided here can assist the HKSAR government in gaining a more comprehensive understanding of family offices and aid in formulating policies to establish a robust ‘family office hub’. Additionally, for the consulting and wealth management industry, this report offers valuable insights to a diverse range of service providers seeking to bolster their engagement in family office-related businesses. The collective effort invested in this report has the potential to significantly motivate the strategic decision-making of various stakeholders within the ecosystem of family offices. We hope that this report will serve as a valuable and reliable resource for families, policymakers and service providers alike.”

Professor Roger King, Senior Advisor and Founding Director of Roger King Center for Asian Family Business and Family Office, HKUST Business School, says: “As wealthy families enter the second generation, family dynamics and needs become more complex. The role of a family office extends beyond wealth preservation and, if properly designed, can serve as a powerful tool for preserving family wealth, family harmony and family values throughout generations (the 'Three Preservations')”.

The future of family offices

Looking toward the future, family offices are poised to play a pivotal role in advancing societal progress. Notably, families differ significantly in their approaches to wealth succession, with some focusing solely on passing down wealth, others harboring ambitions for longevity. The latter group not only emphasizes long-term investment strategies and diversification but also places importance on nurturing the next generation to become responsible “global citizens” and actively participating in philanthropic endeavors to address pressing environmental and social challenges. Family offices can empower families to navigate complex financial and family-related matters while safeguarding their legacy and core values.

[1] Full report: https://afbfo.hkust.edu.hk/system/files/2024-03/landscape-of-family-offices-in-greater-china-2024.pdf