Hong Kong’s First Open-ended Fund Company Regime

Hong Kong is an established fund market with more than 2,000 publicly offered funds, including both local and overseas domiciled funds.

In 2018, a new fund structure named “open-ended fund company” (OFC) was introduced under the Securities and Futures Ordinance to provide a corporate fund structure in addition to the existing available unit trust structure for investment funds domiciled in Hong Kong. The new OFC regime came into effect on 30 July 2018.

The new OFC regime has the potential to transform the onshore fund landscape in Hong Kong. For investors, OFCs offer a more credible and transparent investment vehicle than an offshore vehicle. Information about the status of OFCs, their directors and their investment managers is readily available in Hong Kong. Disputes between investors and OFCs can be resolved in the Hong Kong courts and investors have ready access to redress from a strong regulator in Hong Kong.

The regime offers an opportunity for Hong Kong-based asset managers to establish hedge funds relying only on Hong Kong law. This means that asset managers can minimize compliance burdens as funds will no longer need to comply with offshore laws and regulations. One consequence is that they can minimize costs as there will no longer be a need for offshore counsel, auditors and fund administrators. At the same time, investors in the Greater China region can invest with an even greater degree of confidence as OFCs will be governed by a single legal regime that is familiar to them, that offers a higher degree of transparency and that provides accessible dispute resolution in Hong Kong through the Hong Kong courts and the Hong Kong regulators instead of in an unfamiliar offshore jurisdiction.  Please join Orrick’s Scott Peterman to discuss the pros and cons of using OFCs, as he recounts Orrick’s experience in assisting with the launch of Hong Kong’s first OFC.

Detailed Information

Highlights of the course include:

  • Overview of Legal and Regulatory Components
  • OFC Structure
  • General Regulatory Framework
  • How to Establish Your OFC
  • What Documents Do You Need for Your Application?
  • Key Document: What Is the Instrument of Incorporation?
  • Key Operators: Directors
  • Key Operators: Investment Manager
  • Key Operators: Custodian
  • Does My OFC Need an Offering Document?
  • OFC Umbrella Funds: Uses and Abuses