Digital Assets & Virtual Assets
RWA Tokenisation in Hong Kong: Legal Framework and Structuring Guide
Introduction
Infrastructure — encompassing transport networks, energy facilities, digital infrastructure, utilities, and social infrastructure — has become one of the most sought-after asset classes for institutional investors globally. Its characteristics of stable long-term cash flows, inflation linkage, and essential-service nature make it an attractive investment for pension funds, sovereign wealth funds, and insurance companies. Hong Kong has seen growing activity as a base for infrastructure fund managers targeting Asia-Pacific, Greater China, and emerging market infrastructure opportunities.
Fund Structures for Infrastructure Investing
Cayman Exempted Limited Partnership
The Cayman ELP remains the dominant structure for infrastructure closed-end funds targeting global institutional investors. Infrastructure funds typically have long investment periods (5–7 years) and fund lives of 10–15 years or more, reflecting the long-term nature of infrastructure assets. The Cayman ELP's flexible constitutional documents accommodate the complex waterfall structures and distribution mechanisms common in infrastructure funds.
Hong Kong Limited Partnership Fund (LPF)
The LPF is an increasingly viable alternative for infrastructure managers based in Hong Kong, particularly those targeting Mainland Chinese institutional investors who may prefer a Hong Kong-domiciled vehicle. The LPF's carried interest tax concession (0% rate on qualifying carried interest) makes it attractive for fund managers structuring their performance allocation in Hong Kong.
Club Deals and Co-Investment Structures
Infrastructure transactions are frequently executed through club deal structures or co-investment vehicles alongside a main fund. These allow institutional investors to participate directly in specific infrastructure assets at a lower fee load. Hong Kong SPVs and holding structures are commonly used for co-investment arrangements in Greater China infrastructure.
Project Finance and Infrastructure Debt
Many infrastructure investments are made on a project finance basis: the asset is financed through non-recourse or limited-recourse debt at the project level, secured against the project's assets and cash flows. Hong Kong practitioners advise on project finance documentation including:
- Facility agreements and intercreditor arrangements
- Security packages (share pledges, mortgage over project assets, assignment of project contracts)
- Concession agreements and offtake contracts
- Government support arrangements (e.g., viability gap funding, sovereign guarantees)
For Greater China infrastructure projects, understanding both Hong Kong law and PRC law requirements is essential, as project assets and regulatory approvals are subject to Mainland Chinese law even where the financing documentation is governed by Hong Kong or English law.
ESG and Green Infrastructure
Environmental, social, and governance (ESG) considerations are central to modern infrastructure investing. Institutional investors increasingly require that infrastructure funds have:
- ESG policies integrated into investment decision-making and due diligence
- Reporting frameworks consistent with international standards (TCFD, GRI, UNPRI)
- Green or social impact classification where applicable
- Climate risk assessment for physical and transition risks
Hong Kong's regulatory framework — including the SFC's guidance on climate risk for fund managers and the HKEX ESG reporting requirements — provides a framework for ESG integration that aligns with international best practice.
Regulatory Considerations
Infrastructure fund managers based in Hong Kong must hold an SFC Type 9 (asset management) licence. For managers using project-level debt, familiarity with Hong Kong banking regulatory requirements and the HKMA's lending guidelines is also relevant for bank-financed infrastructure transactions.
Infrastructure funds that include real estate components (e.g., mixed-use development, data centres, logistics assets) may also intersect with REIT regulations and the HKEX listing rules, particularly where the manager is considering an eventual exit via an REIT listing.
How Alan Wong LLP Can Assist
Alan Wong LLP advises infrastructure fund managers, institutional investors, and project sponsors on fund formation, project finance documentation, co-investment structuring, and regulatory compliance. We have experience across a range of infrastructure sub-sectors including renewable energy, transport, digital infrastructure, and social housing. Our investment funds and corporate teams work together to provide integrated advice across the full infrastructure investment cycle.
