VIEWPOINT  
March 2015
CBRE RESEARCH
Ada Choi, CFA
Senior Director, Asia Pacific Research

Marcos Chan 
Head of Research, Hong Kong, Macau & Taiwan
 
 
Overview

Hong Kong is planning to launch a ‘Future Fund’ within 2015, with the objective of generating higher returns and to mitigate the risk of a potential structural fiscal deficit. The Hong Kong Future Fund will receive a seeded fund of HK$220 billion (US$28 billion) and with a further 25-33% annual top-up from the government’s fiscal surplus.
 
Half of the Future Fund will be allocated to alternatives, including real estate
No less than half of the Future Fund will be allocated to alternative investment by injecting capital into the Long Term Growth Portfolio (LTGP) of the Exchange Fund, managed by the Hong Kong Monetary Authority. This will effectively double the size of the LTGP from HK$115 billion (US$14 billion), as at the end of 2014, to HK$225 billion (US$29 billion).
 
The LTGP currently invests about 30% in global real estate assets. If the Future Fund was to invest a similar proportion of its capital, its real estate holdings could gradually increase to HK$68 billion (US$9 billion).
 
The Future Fund is learning from the experience of other APAC sovereign wealth funds
Growing foreign exchange reserves, coupled with an aging population, has prompted several countries in APAC to turn more active in launching sovereign wealth funds (SWFs). They are adopting active reserve management and are increasing their exposure to real estate in their long-term investment portfolios. The experience and strategies adopted by other Asia Pacific SWFs can serve as a reference point for the Future Fund.
 
 
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