OFCs Landsacape in Hong Kong

OFCs Landsacape in Hong Kong

Hong Kong stands tall as a global hub for asset management and fund distribution, boasting a roster of over 2,000 retail investment funds greenlit by the Securities and Futures Commission (SFC). Within this thriving ecosystem, funds find their footing in various forms, including Open-ended Fund Companies (OFCs), Limited Partnership Funds (LPFs), and unit trusts.

Understanding OFCs

An OFC represents an open-ended fund structured as a corporate entity, headquartered in Hong Kong. Distinguished by its standalone legal persona and a dedicated board of directors, each director assumes fiduciary and statutory duties towards the OFC.
Notable characteristics of OFCs encompass:

  • Safeguarded Assets: Assets are sequestered and entrusted to a custodian for secure storage.
  • Licensed Management: Appointment of an SFC-licensed investment manager to oversee regulated activities.
  • Sub-fund Flexibility: Provision for sub-funds, operating as distinct "protected cells" with segregated assets and liabilities, though cross-jurisdictional recognition may vary.

The SFC streamlines OFC establishment through a unified process, simplifying interactions with the Companies Registry.

Benefits of Opting for OFCs

  1. Legal Autonomy: OFCs stand as independent entities, shielding investors and managers from undue liabilities.
  2. Investment Agility: Private OFCs enjoy flexibility in portfolio management without stringent investment constraints.
  3. Liquidity Enhancement: Share cancellations facilitate fund redemptions, bolstering liquidity for stakeholders.
  4. Capital Distribution: Solvent OFCs can distribute from capital, subject to disclosure regulations, enhancing income flexibility.
  5. Umbrella Structure: OFCs embrace umbrella fund models, accommodating diverse strategies within a single entity.
  6. Segregated Sub-funds: Legal segregation of sub-fund assets mitigates cross-contamination risks, safeguarding investor interests.
  7. Regulatory Familiarity: Compliance simplicity under Hong Kong jurisdiction fosters operational ease compared to offshore alternatives.
  8. Mutual Fund Recognition: Authorized OFCs leverage mutual fund recognition frameworks, easing cross-border investment avenues.
  9. Investor Confidence: Familiar corporate frameworks underpinning OFCs bolster investor trust and global participation.

Considerations and Caveats

  1. Investment Limitations: Public OFCs encounter asset class restrictions akin to Hong Kong's publicly offered funds, per SFC guidelines.
  2. Managerial Mandates: SFC-endorsed investment managers are prerequisites for OFCs, contributing operational intricacies.
  3. Custodial Obligations: Stringent custodian mandates, regardless of offering status, may inflate operational overheads.
  4. Directorial Requirements: Mandatory directorial setups, including an independent director, entail recruitment hurdles subject to SFC scrutiny.
  5. Regulatory Hurdles: SFC approvals for post-registration modifications introduce bureaucratic bottlenecks and operational delays.
  6. Segregation Uncertainties: Legal recognition uncertainties surrounding "protected cell" frameworks may undermine liability segregation benefits.


In essence, Hong Kong's OFC framework offers a wealth of advantages, ranging from legal autonomy to regulatory recognition, catering to the needs of both domestic and international investors.


Back to blog