The corporate fund structures launched in Hong Kong, Singapore, and Australia in recent years have got off to a strong start, demonstrating the appetite in Asia-Pacific for onshore alternatives to traditional offshore structures. The next phase of development will determine whether these structures can evolve beyond regional alternatives to become genuine global competitors.
- Sally Mung, Senior Product Manager, Hedge Fund Services, Asia Pacific, Securities Services, BNP Paribas
- Alvin Chan, Director Sales and Relationship Manager, Securities Services, BNP Paribas
Against a volatile economic and geopolitical backdrop, the Asia-Pacific region’s hedge fund industry continues to go from strength to strength, with investors expected to allocate USD 440 billion to the sector through 2025[1]. Cayman remains the dominant hedge fund domicile. Yet innovative onshore fund structures introduced in Hong Kong, Singapore and, to a lesser extent, Australia are gaining traction among fund management companies and their investors – establishing the jurisdictions as regional funds hubs and making them a strong locus for growth going forward.
An overview of structures in Hong Kong, Singapore and Australia
Hong Kong’s OFC
Hong Kong’s Open-ended Fund Company (OFC) regime has achieved substantial market penetration since it came into effect in July 2018. It has attracted over 500 funds[2] to be launched under the regime. Approximately 13% growth to HKD 35 trillion in total assets under management of Hong Kong (including OFC)[3] as at end of 2024, drawn by its competitive attractions:
- Corporate structure: Investment funds are established in corporate form, with limited liability and variable share capital.
- Flexibility: OFCs can be used for alternative and traditional funds with either closed- or open-ended strategies.
- Lower cost: Fewer depositary service and fiduciary requirements compared to traditional trust structures reduce the complexity and cost of setting up funds onshore. Managers only need to engage Hong Kong counsel, unlike the two required in Cayman.
- Umbrella/sub-fund option: The ability to establish a single umbrella structure with multiple sub-funds enables managers to pursue hybrid investment strategies that appeal to diverse investor groups. Sub-funds are easy and inexpensive to set up.
- Tax neutrality: Zero capital gains tax treatment (with some exceptions) matches the tax efficiency of offshore structures with the benefits of onshore domiciliation.
Government support: A grant scheme to subsidise the cost of incorporating or re-domiciling an OFC to Hong Kong covers 70% of eligible expenses paid to Hong Kong-based service providers, subject to a cap of HKD 500,000 for private OFCs and HKD 1 million for public OFCs[4]. The scheme was extended for a further three years in 2024.
Singapore’s VCC
Singapore’s Variable Capital Company (VCC) initiative has grown to over 1400 funds[5] launched since its launch in 2020. Approximately 12% growth to SGD 6.07 trillion[6] total in asset under management in Singapore’s asset management industry (including VCC structure) in 2024. This rapid adoption reflects the structure’s appeal and vigorous promotion:
- Corporate form: Similar to Hong Kong’s OFC, the VCC is a corporate form investment fund structure offering streamlined incorporation and operational requirements.
- Dividend distribution: A VCC can pay dividends out of capital not just profits, which provides more options for distributing returns and is not typically permissible in other corporate forms.
- Investment flexibility: VCCs can be used for open- and closed-ended traditional and alternative fund strategies and be formed as a standalone fund or umbrella fund with multiple segregated sub-funds holding different assets.
- Tax incentives: Along with zero capital gains tax (with exceptions), the Singapore government offers several tax incentives, including the Onshore Fund Tax Exemption Scheme, Enhanced Tier Fund Tax Exemption Scheme and Venture Capital tax exemption.
- Government grants: A grant scheme running up to January 2025 co-funded 30% of qualifying expenses paid to Singapore-based service providers for incorporating or registering a VCC, up to a maximum of SGD 30,000 per application. It successfully catalysed adoption and attracted numerous Hong Kong-based managers to establish secondary offices there.
Australia’s CCIV
Australia’s Corporate Collective Investment Vehicle (CCIV) was introduced in 2022 to align with international vehicles and attract offshore investors:
- Unit trust alternative: Designed as an alternative to the unit trust, the general model for Australian funds.
- Corporate structure: Employs a corporate form investment fund structure.
- Capital gains tax: A 30% capital gains tax is applicable, limiting its draw.
CCIVs have experienced slower uptake than OFCs and VCCs, due in large part to the tax treatment, with managers and investors adopting a wait-and-see approach.
A compelling alternative to offshore funds
Further education about the OFC and VCC structures and their advantages will enhance their appeal, solidifying their position as a compelling alternative to Cayman funds and entice more allocations from North American and European investors. In the meantime, the structures are gaining substantial regional interest.
Streamlined legal and operational requirements facilitate efficient set up of fund management companies and make them relatively cost effective to run. Low-cost simplification and flexibility are a particular boon for start-up managers, enabling them to launch and begin building a track record, while helping broaden the investor market. Traditional hedge funds, with their high investment minimums, have been aimed at institutional monies or high-net-worth individuals. The OFC and VCC regimes have reduced the barriers to entry, in principle enabling managers to target a wider range of previously excluded individual investors at a lower entry point.
OFCs
- Primarily attract investors from Hong Kong or Greater China, who benefit from proximity, time zone alignment and local Know Your Customer (KYC) expertise.
- Success in this market demonstrates regional investors’ appetite for locally domiciled alternatives.
VCCs
- Emerged as a magnet for Southeast Asian investment flows in recent years.
- Also gained traction with European investors seeking exposure to Asian markets, including India’s stock market, through a regulated onshore vehicle offering favourable tax treatment.
CCIVs
- Primarily appeal to onshore investors, particularly superannuation pension funds.
- The higher tax burden compared to alternative offerings has limited its attraction, with many Australian fund managers opting to use domestic trust vehicles for local fundraising and Cayman funds to target international capital[7].
- Managers appear to be waiting to see if the government will amend the structure to bring it closer into line with the OFC and VCC models to enhance its competitiveness.
Where next? Future evolution of the region’s structures
The early success of the Hong Kong OFC and Singapore VCC demonstrate the burgeoning demand for onshore alternatives to traditional offshore Cayman structures. This success has prompted Dubai International Financial Centre (DIFC) to replicate the model. So far, 75 hedge funds have already registered, and that is likely just the beginning.[8]
Regulators and managers must now consider the 2.0 future of the OFC, VCC and CCIV products and how to take advantage of them. For example:
- Will managers use the OFC structure to become a regional product for Greater China distribution, and become a bridge between China’s economy and the outside world?
- Can it be used to promote the IPO market in Hong Kong, with global investors injecting funds into the vehicle to help fundraising of local IPOs?
- Will there be greater clarity on the tax treatment for private investments to encourage private capital managers to start using the platform?
As 2026 draws closer, managers and their partners must make sure they are well-prepared to take advantage of the next developments in these new structures.
Value in partnering for success
BNP Paribas is a global bank with specialised teams across the APAC, EMEA and Americas regions able to provide alternatives managers with a full suite of banking, prime brokerage, fund administration and custody services. Managers can minimise their counterparty relationships and benefit from consistent service delivery and greater operational efficiencies, while leveraging local experts with experience supporting OFC, VCC, and CCIV structures.
[1] With Intelligence – Get the Advantage in Alternatives
[2] Starting up a Hedge Fund in Hong Kong? Should I Use a HK, BVI, or Cayman Islands Structure?
[3] Hong Kong’s AUM grew 13% with 81% increase in fund inflows: SFC’s 2024 survey on asset and wealth management business | Securities & Futures Commission of Hong Kong
[4] Hong Kong OFCs – a rough guide, Norton Rose Fulbright, July 2024
[5] The extended deadline to take advantage of the VCC grant scheme, Trustmoore
[6] Singapore’s AUM grows 12% to $6.07 tril in 2024; net inflows rebound with 50% y-o-y growth
[7] Fund managers seek offshore flows with Cayman offerings, Money Management, 16 June 2025
[8] Fund manager migration: Understanding the push and pull towards ADGM and DIFC | Singapore | Global law firm | Norton Rose Fulbright