Funds & Asset Management in Hong Kong: Legal Framework for Fund Managers 2026

Funds & Asset Management in Hong Kong: Legal Framework for Fund Managers 2026

Hong Kong is one of Asia's leading fund management centres, hosting over 2,000 licensed asset managers and administering more than USD 4 trillion in assets under management. The city's combination of a common law legal system, proximity to Mainland China capital flows, a sophisticated regulatory regime administered by the Securities and Futures Commission (SFC), and a competitive tax environment makes it the jurisdiction of choice for fund managers targeting Asia-Pacific investments and investors.

This guide provides an overview of the legal framework for funds and asset management in Hong Kong, covering fund structures, SFC licensing requirements, managers' fiduciary and regulatory duties, fund marketing and distribution, and the key regulatory developments shaping the industry in 2026. It is intended for fund managers considering establishing or expanding operations in Hong Kong, as well as investors seeking to understand the regulatory environment.

Fund Structures Available in Hong Kong

Fund managers establishing vehicles in Hong Kong have three primary structural options, each with distinct characteristics.

The Limited Partnership Fund (LPF) was introduced in 2020 under the Limited Partnership Fund Ordinance and has rapidly become the preferred structure for closed-ended private funds focused on private equity, venture capital, and private credit. The LPF is a Hong Kong-domiciled vehicle that combines the flexibility of a partnership structure with a streamlined registration process (typically completed in one to two business days). LPFs benefit from Hong Kong's tax exemption for offshore funds and are eligible for the carried interest tax concession introduced in 2021.

The Open-Ended Fund Company (OFC) is a corporate fund structure introduced in 2018 and designed primarily for open-ended funds, including retail and professional investor funds. The OFC offers a Hong Kong-domiciled alternative to the Cayman Islands exempted company, with the ability to re-domicile existing offshore funds to Hong Kong under a re-domiciliation regime introduced in 2021. OFCs are regulated by the SFC and must appoint an SFC-licensed investment manager.

Offshore structures — primarily Cayman Islands exempted limited partnerships and exempted companies — remain widely used by Hong Kong fund managers, particularly for funds targeting institutional investors and for strategies with established track records in offshore vehicles. While offshore structures lack the brand recognition of Hong Kong-domiciled vehicles, they offer flexibility in structuring and are familiar to international institutional investors.

SFC Licensing for Asset Managers

Asset managers operating in Hong Kong are required to hold a licence from the SFC under the Securities and Futures Ordinance (SFO). The relevant licence type for most fund managers is Type 9 (Asset Management), which authorises the holder to manage portfolios of securities and futures contracts on behalf of clients. Managers engaged in advising on investments also require a Type 4 (Advising on Securities) licence. Managers of virtual asset funds that hold Type 1 virtual assets (securities-type tokens) require the appropriate SFC virtual asset licences.

The SFC licensing process involves submission of a detailed application covering the applicant's corporate structure, ownership, key personnel, compliance systems, and financial resources. Responsible Officers (ROs) — senior individuals who supervise and are responsible for the regulated activity — must individually satisfy the SFC's fit and proper requirements, including relevant industry experience and qualifications. The SFC typically takes three to six months to process a new licence application, though processing times vary.

Licensed managers are subject to ongoing obligations including minimum liquid capital requirements, notification obligations for material changes, compliance with the SFC's Fund Manager Code of Conduct, and submission of annual returns and financial statements.

Fund Manager Duties: Fiduciary Obligations and Regulatory Standards

Fund managers in Hong Kong owe fiduciary duties to their funds and investors, as well as regulatory obligations imposed by the SFC under the Fund Manager Code of Conduct (FMCC). These duties overlap substantially but are not identical.

The core fiduciary duties include the duty to act in the best interests of investors, the duty of loyalty (avoiding and managing conflicts of interest), and the duty of care and skill in the management of fund assets. These duties are reinforced by the FMCC, which requires managers to: act honestly and in the best interests of clients; manage conflicts of interest fairly; maintain adequate systems and controls; ensure fund assets are properly safeguarded; and maintain comprehensive books and records.

Conflicts of interest are a particular focus of SFC supervision. Managers must have written policies governing the identification and management of conflicts, must disclose material conflicts to investors, and must not allow conflicts to adversely affect investor interests. Common conflict scenarios include side-by-side management of funds and proprietary accounts, allocation of investment opportunities among multiple funds, and transactions with related parties.

Fund Marketing and Distribution in Hong Kong

Marketing funds to investors in Hong Kong is subject to SFC authorisation requirements and restrictions. Retail funds — those offered to the general public — must be authorised by the SFC under Part IV of the SFO and must comply with the SFC's Code on Unit Trusts and Mutual Funds. SFC-authorised funds must meet requirements on investment restrictions, diversification, liquidity, valuation, and disclosure.

Professional investor funds — those restricted to "professional investors" as defined in the SFO (broadly, institutional investors and individuals with portfolios of HKD 8 million or more) — may be offered without SFC authorisation of the fund itself, provided the distribution is conducted by a licensed intermediary. Private placements to professional investors are the most common marketing approach for alternative fund strategies.

The SFC has in recent years focused on ensuring that marketing materials for funds are fair, clear, and not misleading, and that risk disclosures are adequate. Managers should ensure all fund marketing materials and investor communications comply with SFC guidelines on disclosure and investor protection.

Key Regulatory Developments for 2026

Virtual asset funds: The SFC has developed a licensing framework for virtual asset fund managers, and managers of funds holding virtual assets above a defined threshold are required to be licensed under the VASP regime or hold the appropriate SFC type licences. This is a rapidly evolving area and managers with virtual asset exposure should seek specific legal advice.

Tokenised funds: Following Project Ensemble and the SFC's guidance on tokenised funds, several fund managers are exploring the issuance of tokenised fund interests on distributed ledger platforms. The SFC has confirmed that existing regulations apply to tokenised funds, and managers must ensure compliance with authorisation, distribution, and custody requirements regardless of the technology used.

ESG and sustainable finance: The SFC has implemented mandatory ESG-related disclosure requirements for SFC-authorised funds making ESG-related claims and has introduced requirements for fund managers to consider climate-related risks in their investment and risk management processes. The regulatory framework for sustainable finance in Hong Kong continues to develop, with further guidance expected in 2026.

Fund re-domiciliation: The OFC re-domiciliation regime continues to attract offshore funds considering a move to Hong Kong domicile, driven by reputational benefits and access to the Mainland-Hong Kong fund recognition schemes.

How Alan Wong LLP Can Help

Alan Wong LLP advises fund managers, fund sponsors, and investors on all aspects of fund formation and asset management regulation in Hong Kong. Our services include SFC licence applications and ongoing regulatory compliance, LPF and OFC formation, fund documentation (LPA, PPM, subscription agreements), SFC regulatory advice, and virtual asset fund structuring.

If you are establishing a fund or asset management operation in Hong Kong, or require regulatory advice on an existing business, visit our fund formation practice page to learn more about how we can assist.