Fund vehicles for Liquid alternatives


A choice of onshore vehicles for different types of alternative strategies

  • Onshore restricted schemes can be set up as open-ended fund companies (OFC) or Limited Partnership Funds (LPF)
  • They can be used for a wide range of liquid alternative strategies (long/short, leverage, derivatives)

Which can be tailored for different management and operating models

  • The investment manager is subject to basic eligibility requirements and custody arrangements must be in place
  • No restriction on investment scope
  • Flexible redemption terms to investors
  • An auditor must be appointed for the purpose of auditing annual financial statements prepared according to Hong Kong Financial Reporting Standards, International Financial Reporting Standards (IFRS) or other accounting standards

New ESG disclosure requirements

New rules reflecting recommendations of the Task Force on Climate-Related Financial Disclosures have been implemented in the Fund Manager Code of Conduct and a Circular to Licensed Corporations. While the initial focus is on climate-related risk, fund managers are encouraged to consider other sustainability risks.

As from 20 August 2022, large fund managers (above HKD 8 billion of assets under management) must address climate risks in their governance, investment management, risk management and disclosures. Smaller fund managers must comply with baseline requirements as from 20 November 2022, when enhanced standards will start to apply to large fund managers. Disclosure requirements apply at both fund manager and fund level.

Key figures1


hedge funds managers based in Hong Kong


city in the world with the largest concentration of hedge funds

211.3 billion (in HKD)

REIT market capitalization

Fund vehicles for liquid alternatives

Private open-ended fund companies (OFC) Code on Open-Ended Fund Companies

  • OFCs are legal persons and must appoint a board of a minimum of two natural person directors with sufficient expertise and hands-on experience (specific to the fund strategy)
  • Variable share capital: the paid-up share capital is always equal to the OFC’s Net Asset Value
  • Private OFC are not authorised by SFC and can only be offered to “professional investors” in Hong Kong with a minimum subscription amount of HKD 500,000
  • No investment restrictions: private OFCs can invest in all asset classes
  • Investment manager must be registered or licensed for asset management activity and remain fit and proper after registration
  • Legally segregated liability of sub-funds and cross sub-fund investments
  • An eligible custodian independent from the investment manager must be appointed to perform safe-keeping and account keeping of the OFC’s assets, ensure their proper segregation and exercise due care in the selection, appointment and on-going monitoring of delegates including sub-custodians
  • Offering document must contain risk disclosure specific to the type of assets
  • OFC must maintain records and issue audited financial reports using Hong Kong generally accepted accounting principles (GAAP), International Financial Reporting Standards (IFRS) or other accounting standards on a case-by-case basis
  • Subject to certain criteria, profits are not taxable under Hong Kong SAR laws
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Market insight: While the OFC vehicle is relatively recent, they are significant benefits (simplification of administration, globally recognised structures) for managers to launch or convert funds in the form of OFC. Until 9 May 2024, managers can apply for a grant covering up to 70% of expenses paid to Hong Kong-based service providers, subject to a cap of HKD 1 million per OFC and a maximum of three OFCs per manager.

  • LPFs must have at least one Limited Partner and a General Partner, who may be
    • A natural person
    • A private Hong Kong company limited by shares
    • A registered non-Hong Kong company
    • A Hong Kong registered limited partnership
    • Another LPF
    • Or a non-Hong Kong limited partnership without legal personality
  • The following arrangements may all be contractually defined among partners: the admission / withdrawal of partners, the transfer of interests, the management structure and governance, the investment scope and strategy, the capital contributions and withdrawals, the frequency of financial reporting and the verification of net asset value, the distribution of proceeds, the custodial arrangements and the life of the fund
  • The General Partner appoints
    • An investment manager (a Hong Kong licensed manager is not required unless it conducts regulated activities)
    • A person responsible for anti-money laundering (AML) and counter-terrorist financing (CFT)
    • And an independent auditor
  • The General Partner is responsible for
    • Maintaining proper records (unless this has been delegated to the investment manager)
    • Filing annual returns of the LPF
    • Notifying the company registry of changes: investment scope, investment manager or responsible person, identity of the General Partner
  • No prescribed administration requirements except for AML/CFT
  • Financial statements must be sufficient to demonstrate and explain each transaction and provide an accurate account of the financial condition and performance of the fund
  • Under certain conditions, LPFs may be eligible to profits tax exemption and tax concession on carried interest. The partnership interest is not considered as a stock and is not subject to stamp duty
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Market insight: In 2021, 90%2  of surveyed Hong Kong asset managers indicated that they intended to or had already set up an LPF

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Laure LY
Head of Greater China Sales and Relationship Management at Securities Services

[1] d01.pdf (, SFC; Hong Kong Investment Funds Association – Investor Survey commissioned by the Hong Kong Investment Funds Association ( ; Segtech New analysis shows hedge fund industry is booming ( ; HKEX: Real Estate Investment Trusts (; Hong Kong Hedge Fund Strategy Profile | October 2019 (

[2] idem