Fund vehicles for Private assets


A choice of onshore vehicles fit for private asset funds…

  • A choice of vehicles tailored for open-ended and closed-ended structures: private Open-ended Fund Company (OFC), Limited Partnership Fund (LPF) and Real Estate Investment Trust (REIT)
  • Allowing all asset classes: private equity, venture capital, private debt, real estate, infrastructure

…with flexible features catering for different investor targets, investment strategies and redemption policies

  • LPFs and REITs without legal personality (usually recognised as tax transparent) and private OFCs with legal personality (taxable)
  • No restrictions on investment or borrowing for privately offered OFCs and LPFs
  • Flexibility to determine redemption frequency, impose redemption restrictions or benefit from stock exchange liquidity
  • Required to produce annual audited financial statements

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

170 USD million

Of capital under management by private equity funds in 2020


Limited partnerships registered in 11 months since introduction in 2020


Of Hong Kong asset managers intend to redomicile existing offshore structures


Private Equity and Venture Capital  Firms

Fund vehicles for private assets

  • 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%  of surveyed Hong Kong asset managers indicated that they intended to or had already set up a Limited Partnerships Fund

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

  • OFCs have separate legal personality and limited liability and can be open-ended or closed-ended
  • Variable share capital: the paid-up share capital is always equal to the OFC’s Net Asset Value
  • Legally segregated liability of sub-funds and cross sub-fund investments
  • A board of directors with a minimum of two directors with sufficient expertise and experience must be appointed
  • Private OFCs must be registered but do not have to be authorised by the SFC. The investment manager must be licensed or registered with the SFC and remain fit and proper
  • 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
  • Can be distributed to professional investors only
  • Investment and borrowing restrictions must be clearly spelt out in the constitutive and offering documents
  • 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, there are significant benefits for managers (simplification of administration, globally recognised structures) to launch or convert funds in the form of an OFC. A scheme allows managers to 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 until 9 May 2024.

Real Estate Investment Trusts (REIT) Code-on-Real-Estate-Investment-TrustsDec-2020-Eng.pdf (

  • A REIT doesn’t have legal personality and is established by the trust deed for the benefit of investors (beneficiaries) who own units
  • A REIT must be authorised by the SFC and appoint a management company and a trustee
  • Mandatory listing on the Hong Kong Stock Exchange (HKEX)
  • Must focus on recurrent rental income generation but a wide range of real estate assets classes is acceptable. Connected party transactions conducted at arm’s length, minority-owned properties and property development projects are acceptable under certain conditions as well as single property REITs.
  • Aggregate borrowing (with no minimum interest coverage ratio) is limited to 50% of the net asset value
  • Exempt from profits tax and tax on foreign sourced income. Dividends from special purpose vehicles are tax -exempt
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Market insight: Until 9 May 2024, REITs

– Listed on the HKEX on or after 10 May 2021
– With a minimum capitalisation of HKD 1.5 billion at the time of listing

 can submit an application with the SFC to recover up to 70% expenses paid to Hong Kong-based service providers in relation to the listing of the REIT, subject to a cap of HKD 8 million per REIT.

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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