How to Start a Hedge Fund in Hong Kong
Updated on Wednesday 19th July 2017
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Hong Kong represents the leading financial center situated in the Greater China Region. Foreign investors may set up a hedge fund startup following the local regulations and it is important to know that the hedge fund market increased in this jurisdiction in the last years. For example, the number of hedge funds registered in 2014 was set up at 778. In 2016, Hong Kong registered more investment vehicles set up as hedge funds compared to Singapore, which is also one of the top investment destinations in Asia. At the same time, the value of the assets under management held by Hong Kong hedge funds, increased by 38.8% in the same period.
Regulatory framework for Hong Kong hedge funds
Foreign businessmen may set up two main types of hedge funds in Hong Kong:
• private hedge funds;
• retail hedge funds.
The regulatory framework applicable to private hedge funds stipulate that such entities are not required to obtain an authorization from the Securities and Futures Commission (SFC), the main institution which supervises the activity carried out through investment vehicles.
Instead, the procedure on how to start a hedge fund in Honk Kong as a private structure stipulates that the fund will operate through the regulations available for fund managers. A fund manager carrying investment activities in Hong Kong will receive an authorization from the above mentioned institution, following the Part V of the Securities and Futures Ordinance. The regulations on how to start a fund in Hong Kong registered as a retail structure require the investors to obtain an authorization for the fund, issued by the SFC.
Requirements for the hedge fund manager
In order to carry out an investment activity in Hong Kong, the investors are required to appoint a fund manager. A fund manager in Hong Kong must comply with the SFC’s requirements, attesting his or her qualities in the financial field.
In this sense, investors interested in how to start an investment fund in Hong Kong should know that the fund’s manager has to follow the regulations provided by the Fund Manager Code of Conduct.
The hedge fund manager has to perform regular valuations of the fund, in order to calculate the net asset value. Further on, the manager has to ensure that the company meets the criteria on internal control, for matters such as auditing or training.
Businessmen are invited to contact our team of affiliates in Hong Kong for more information on the registration of a hedge fund and the tax regulations applicable to this vehicle.