Hong Kong’s asset management industry is poised for significant growth following landmark tax reforms that introduce a retrospective 0% effective tax rate on qualifying carried interest and performance fees, an incentive unmatched by competing global hubs.
- New retrospective 0% tax rate on carried interest and performance fees
- Hong Kong led global IPO fundraising in 2025, continuing strong in 2026
- ETFs turnover increased 17% in H1 2026 as product innovation expands
What happened
Hong Kong introduced substantial reforms to its fund exemption rules and carried interest taxation, creating a 0% effective tax rate on qualifying carried interest and performance fees starting retrospectively from the 2025 tax year. This move resolves longstanding legal uncertainties that had driven some asset managers to other jurisdictions.
KPMG’s report underscores that this reform is the most significant tax development in a generation for the city’s asset management industry. By eliminating operational ambiguities, the incentives make Hong Kong a compelling base for global and regional asset managers, particularly in private equity, credit, and hedge funds.
Why it matters
These tax reforms come amid a backdrop of robust market performance, where Hong Kong regained its status as the world’s leading IPO fundraising hub in 2025 and remains a top global market in 2026. This strong capital markets momentum complements the incentives, creating a fertile environment for asset management growth.
Additionally, the asset management industry in Hong Kong is experiencing rapid ETF market development. Average daily ETF turnover rose by 17% in the first half of 2026, driven by increasing investor demand for diversified products including active strategies, thematic funds, and virtual asset exposure, broadening investment opportunities.
What to watch next
Investor trust and product governance will be critical as Hong Kong’s asset management industry expands into more sophisticated ETF offerings, such as leveraged and single-stock ETFs. Firms that balance innovation with strong compliance and investor education are expected to lead growth.
Industry focus will also be on attracting and developing talent to manage the evolving fund structures and capitalize on the large IPO pipeline. Monitoring how global asset managers establish permanent operations in Hong Kong under the new tax framework will provide insights into the sector’s trajectory.