Date
22 September 2019
The Hong Kong government has invited business leaders and financial sector professionals for suggestions on improving the investment strategies and portfolios of a key reserve fund. Photo: Xinhua
The Hong Kong government has invited business leaders and financial sector professionals for suggestions on improving the investment strategies and portfolios of a key reserve fund. Photo: Xinhua

Expert input sought to boost Future Fund returns, strategy

Financial Secretary Paul Chan Mo-po has invited some financial experts and business leaders to offer suggestions on ways to enhance the investment returns on the Future Fund, which was launched in 2016 with an aim to make more efficient use of the government’s fiscal reserves.

According to an announcement Wednesday, Victor Fung Kwok-king, honorary chairman of global sourcing giant Li & Fung (00494.HK); Professor Lawrence Lau Juen-yee, an economist and former vice-chancellor of the Chinese University of Hong Kong; Peter Wong Tung-shun, deputy chairman and chief executive of The Hongkong and Shanghai Banking Corp; and Norman Chan Tak-Lam, chief executive of Hong Kong Monetary Authority (HKMA) have been roped in for advice on investment strategies and portfolios of the Future Fund.

As Chan is scheduled to retire from his post on Oct. 1, his successor — whose identity is not known yet — is is expected to continue to offer advice and recommendations.

Established by the government on Jan. 1, 2016, the Future Fund, which is placed with the Exchange Fund, aims to secure higher investment returns for the fiscal reserves over a 10-year investment period. The fund had an initial endowment of HK$219.73 billion, which came from the balance of the Land Fund.

About 50 per cent of the Future Fund is set aside for incremental placement with the Exchange Fund’s long-term growth portfolio to be built up gradually over a period of around three years, which includes private equities and investments in properties outside Hong Kong, while the rest is placed with the Exchange Fund’s investment portfolio or other investment assets.

In his budget speech on Wednesday, Chan noted that the Future Fund achieved composite rate of return of 4.5 percent and 9.6 percent respectively in its first two years of operation.

The financial and business leaders that have been invited will give advice and recommendations on the investment strategies and portfolios of the fund as well as ways to achieve more diversified investment, the finance chief said, the Hong Kong Economic Journal reports.

Chan said the objective is to enhance the return while consolidating Hong Kong’s status as a financial, commercial and innovation center, and raise the productivity and competitiveness of the territory in the long run.

The financial secretary added that he looks forward to receiving the advice and recommendations from the invested market experts and business leaders.

According to Chan, the Future Fund currently has a size of over HK$200 billion and that it will continue investing for the future of Hong Kong.

Since the amount is unlikely be used up for a long period of time, he said he has commissioned the HKMA to invest part of the fund in some alternative assets with lower liquidity but higher potential long-term returns.

Chan has said in the past that the return goal for the Future Fund would be somewhat higher than the Exchange Fund, the war chest managed by the HKMA to defend the Hong Kong dollar’s peg to the greenback.

A fund investment industry insider told HKEJ that the Future Fund should take reference from other sovereign funds and build a portfolio that includes not only stocks, bonds and alternative assets but also assets including private equities and infrastructure projects that are less correlated to economic cycles.

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