The Hong Kong government is keen to take a big bite of the global asset management pie, and with its new law on limited partnership funds it is showing serious intent to lure alternative funds away from their homes in offshore jurisdictions and Singapore, and anchor them in the city. Mithun Varkey reports
The Hong Kong government has taken a firm step towards preserving and reaffirming its position as a global financial hub with the passing of the Hong Kong Limited Partnership Fund Ordinance (LPFO).
The ordinance, which came into effect from 31 August 2020, is an important step in attracting close-ended funds to domicile in the city and away from offshore jurisdictions, which has been the default model for most fund managers.
The new law allows fund managers to set up limited partnership funds (LPFs) in Hong Kong. The LPF regime follows the open-ended fund companies (OFC) regime, which came into effect on 30 July 2018, providing the option for Hong Kong-domiciled, open-ended investment funds to be structured in a corporate form, rather than as unit trusts, which has been the conventional structure followed for more than a century.
The LPFO regime is a registration scheme that allows a variety of alternative asset classes such as private equity (PE) funds, venture capital funds, real estate funds, infrastructure funds, funds of funds, family offices and even hedge funds to be domiciled in HongKong.
“LPFO is part of a series of building blocks put in place by the government in the last couple of years to anchor funds in Hong Kong,” says Anson Law, a senior manager in the market development division of the Hong Kong Monetary Authority (HKMA), who has been spearheading the legislation.