The "2024 Hong Kong Private Wealth Management Report" jointly released by the Private Wealth Management Association (PWMA) and KPMG today (22nd) shows that the Hong Kong private wealth management industry recorded a net inflow of HK$341 billion in 2023, which was about twice the increase of HK$121 billion in 2022, with the assets under management (AUM) increasing slightly by 0.6% to HK$90.22 trillion. Net inflow of HKD 340 billion last year doubles year on year The report surveyed 35 member organizations of the PWMA from July to September this year and interviewed industry executives, frontline personnel, technical personnel, and technical suppliers. The results found that after two consecutive years of decline, there was a turning point in the Hong Kong private wealth management industry in 2023. The net inflow of funds last year was approximately HK$341 billion, about three times that of 2022 (HK$121 billion) and a year-on-year increase of two times. AUM increased slightly by 0.6%, with most coming from Hong Kong and the Mainland Assets under management (AUM) increased by 0.6% year on year to HK$90.22 trillion, still below the level of HK$11.3 trillion in 2020. The surveyed association member companies indicated that currently an estimated 67% of their AUM comes from Hong Kong and the Mainland, and these investments have helped to increase the overall AUM. AI becomes the hottest investment theme Overall, the investment return of private wealth management assets in 2023 decreased by 3.2%, slightly outperforming the broader markets in Hong Kong and the Mainland. The markets in Hong Kong and the Mainland experienced another year of decline, mainly due to disappointing recovery from the Chinese epidemic. In contrast, the US market rebounded after the bear market in 2022, with the technology sector seeing the largest increase. Artificial Intelligence/Machine Learning (29%) is becoming the most popular investment theme for private wealth clients, followed by biotechnology and medical innovation (18%), virtual assets (such as cryptocurrencies, NFTs, etc.), and commodities (such as gold) tied for third place, with 15% of clients considering them key investments. Nearly 80% of companies are taking a wait-and-see approach to virtual assets However, the majority (79%) of private wealth management companies still have a wait-and-see attitude towards virtual assets, with only 17% developing virtual asset trading and/or custodial services for customers, and 4% planning to invest in related services in the next 2-3 years. Currently, 96% of companies only allocate less than or equal to 5% of their AUM to virtual assets. Nevertheless, surveyed companies are confident in the future growth of virtual assets in Hong Kong, believing that as investment infrastructure expands, customer interest may increase. 32% of companies expect to allocate 6-10% of their AUM to virtual assets within five years, a significant increase compared to the current 2% of companies. Hong Kong remains a leading private wealth management center The report points out that Hong Kong remains a leading private wealth management center. 86% of companies indicated that in 2024, the demand for opening new accounts in Hong Kong and/or holding assets for customers is "increasing or roughly the same" compared to last year. However, compared to other private wealth management centers, the number of clients with no strong preference for Hong Kong has increased, from 32% last year to 59%. Assets under management from Hong Kong and the Mainland expected to increase to 71% Despite the challenging macroeconomic environment and only a moderate increase in asset management in 2023, the optimism in the Hong Kong private wealth management industry remains high. 76% of surveyed companies hold a moderate to high optimistic view of the market prospects over the next five years. In the next five years, the Mainland and Hong Kong will continue to be the largest sources of wealth for the private wealth management industry, with AUM expected to increase from the current 67% to 71%. Wealth from the United States and Europe is projected to decrease slightly. Wealth from Southeast Asia and the Middle East will see slight expansions. As a result, 38% of companies view the Mainland as a current or future target, with 21% of companies targeting new wealth channels in Southeast Asia, and another 15% focusing on the Middle East market.