Fund vehicles for Traditional assets


A recently expanded toolbox with additional / alternative requirements for specific products…

  • Collective investment schemes can either take the form of a unit trust or an Open-ended Fund Company (OFC) established as a limited liability company, subject to authorisation by the Securities and Futures Commission (SFC)
  • The Code on Unit Trusts and Mutual Funds imposes specific rules for specialised schemes such as money market funds, index funds or structured funds (including synthetic ETFs)

…with significant flexibility for structuration, management and access to mainland China

  • Possibility to set up single funds, umbrella and master-feeder structures. Under certain conditions, a feeder may be authorised, notably if the master fund is a recognised jurisdiction scheme[1] subject to an acceptable inspection regime[2] or if the master fund is recognised under a mutual recognition of funds scheme (e.g. China)
  • Investment management must be delegated to a licensed manager who can sub delegate portfolio management to an investment manager located in a jurisdiction included in the list of the SFC or to an affiliate in other jurisdictions (subject to certain conditions)
  • No quantitative minimum capital or net asset value requirement but size should be sufficient to allow for a cost-efficient management of the fund
  • Minimum one regular dealing day per month
  • Possibility to apply for mutual recognition and distribution in mainland China and other jurisdictions from time to time
  • Flexibility to use Hong Kong Financial Reporting Standards, International Financial Reporting Standards (IFRS) or other accounting standards acceptable to the SFC

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. n

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 fund manager or fund level.

Key figures3


Hong Kong- domiciled mutual funds and unit trusts vs 432 in 2012


Umbrella funds and 41 feeder funds


Hong Kong funds recognised by mainland China

Fund vehicles for traditional assets

Public Open-Ended Fund Companies (OFC)code-on-open-ended-fund-companies.pdf (

  • OFCs can be structured as single funds, umbrella funds with segregated sub-funds or master feeder structures
  • OFCs are legal persons and must appoint a board with a minimum of two directors with sufficient expertise including one independent director. Overseas directors must appoint an eligible process agent
  • 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
  • Subject to authorisation by the SFC and must comply with SFC Handbook for Unit Trusts and Mutual Funds, Investment-Linked Assurance Schemes and Unlisted Structured Investment Products (SFC Products Handbook)
  • Can be offered to retail investors
  • 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
  • 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

  • Unit trusts can be structured as single funds, umbrella funds with segregated sub-funds or master feeder structures
  • A unit trust is established by the trust deed for the benefit of investors (beneficiaries) who own trust units
  • A unit trust doesn’t have legal personality and is not deemed a taxable person
  • A licensed fund manager must be appointed to manage assets
  • A trustee with broad responsibilities must be appointed. The trustee must act in the best interest of the beneficiaries and is typically entrusted to, inter alia:
    • Monitor the investment manager and ensure the fund is invested in accordance with the applicable law, the constitutive documents, investment strategy and restrictions
    • Ensure assets are adequately segregated (typically by a custodian)
    • Perform administrative tasks and maintain registers of unitholders
    • Control that fees charged by its delegates are fair and reasonable
    • Report certain information to the SFC and the auditor of the fund
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Market insight: Historically unit trusts had been the only available option to structure Hong Kong-domiciled retail funds until OFC was introduced in 2018. They remain popular with larger fund managers

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

[1] List of recognised jurisdiction schemes and inspection regimes | Securities & Futures Commission of Hong Kong (

[2] idem

[3] d01.pdf (, SFC; Hong Kong Investment Funds Association – Investor Survey commissioned by the Hong Kong Investment Funds Association (