Amid global competition for capital and innovation, Hong Kong’s financial ecosystem is at a juncture where alternative investments, such as private equity ( PE ), venture capital ( VC ) and private credit ( PC ), play an increasingly more important role in building its start-up landscape, according to a recent report.

Such alternative investment vehicles have also been widely deployed by family offices and ultra-high-net-worth individuals ( UHNWIs ) and have been proven to be practical wealth management tools for risk diversification, finds the Fuelling Start-up Success: Attracting and Cultivating Home-based Alternative Investment Funds report, published by Hong Kong’s Financial Services Development Council ( FSDC ).

Beyond merely bridging funding gaps, these strategies, the report notes, deploy patient, risk-tolerant capital that empowers early-stage ventures to scale and enables mature industries to pivot, advancing long-term economic growth and transformation.

With an eye to catalyzing the interplay of alternative investments and innovation, the report recommends:

• a strategic and forward-looking policy vision to promote Hong Kong as a global hub for alternative investment funds
• introducing a tailored regulatory regime for PE, VC and PC
• modernizing the tax and regulatory frameworks to support alternative investments
• optimizing public funds to drive growth in PE, VC and PC
• driving innovation growth through reimagined funding and technology transfer
• diversifying through the inclusion of specific alternative investment options in the territory’s Mandatory Provident Fund retirement scheme.

“Hong Kong is uniquely positioned to strengthen its financial ecosystem into a launchpad for next-generation start-ups – bridging global capital with regional innovation,” says Benjamin Hung, the FSDC’s chairman. “By deepening its alternative investment landscape and fully integrating it into the city’s asset and wealth management proposition, the city can catalyze a more vibrant and scalable innovation economy capable of delivering impactful solutions to global challenges.

“The policy recommendations put forth in the report are designed to chart a forward-looking path for aligning incentives, institutional collaborations and private capital to unlock the full potential of this interplay. By fostering stronger public-private partnerships and removing structural barriers, these pave the way for more inclusive economic growth and long-term societal value.”