TL;DR:
The Open-Ended Fund Company (OFC) regime gives Hong Kong a modern, corporate-style fund vehicle for both public and private funds. It combines flexible share capital, segregated sub-funds, and a one-stop SFC registration system — all within one of the world’s most fund-friendly tax environments.
What Is an OFC?
An Open-Ended Fund Company (OFC) is an investment fund set up in corporate form, with variable share capital and segregated liability between sub-funds.
Introduced under Part IVA of the Securities and Futures Ordinance (Cap. 571), and governed by the OFC Rules and OFC Code, this regime lets Hong Kong host funds that can issue and redeem shares directly at Net Asset Value (NAV) — unlike traditional companies.
OFCs can be:
- Private OFCs – for professional investors, more flexible investment scope, lighter compliance.
- Public OFCs – authorised by the Securities and Futures Commission (SFC), usually distributed to retail investors, following stricter investment and disclosure requirements.
Why the OFC Structure Matters
- Corporate identity: the fund itself is a legal person, unlike LPFs.
- Variable capital: investors can subscribe or redeem at NAV.
- Segregated sub-funds: assets and liabilities ring-fenced under one umbrella.
- Regulatory credibility: governed by the SFC, signalling institutional-grade governance.
- Global compatibility: mirrors UCITS/ICAV structures in Europe and VCC in Singapore.
Private vs Public OFCs — Key Differences
| Feature | Private OFC | Public OFC |
| Authorisation | No (filed directly with SFC) | Yes (SFC-approved under UT Code) |
| Investor base | Professional investors only | Retail investors allowed |
| Investment scope | Broad (no specific asset restrictions since 2020) | Must comply with SFC Product Handbook / UT Code |
| Custodian | Mandatory; can be licensed intermediary or authorised institution | Mandatory; must meet stricter UT Code criteria |
| Disclosure | Annual reports to investors only | Prospectus + NAV disclosures required |
(TITUS note: most managers we advise use the private OFC for flexibility and speed.)
Core Setup Requirements
1. Mandatory Parties
| Role | Requirement |
| Investment Manager | Must hold a Type 9 (asset management) licence from the SFC. |
| Custodian | Must be an eligible institution under the OFC Code; responsible for safekeeping scheme property. |
| Directors | At least two individuals, one independent, meeting SFC “fit and proper” standards. |
| Company Secretary / Registered Office | Must be located in Hong Kong. |
| Auditor | Annual audit required. |
2. One-Stop Registration
The OFC application goes through the SFC, which liaises directly with the Companies Registry — meaning managers don’t have to file separately.
3. Variable Capital & Sub-Funds
An OFC can be set up as:
- Standalone OFC – one pool of assets.
- Umbrella OFC – multiple sub-funds with segregated liabilities (most common).
Tax Benefits of OFCs
Just like LPFs, OFCs benefit from Hong Kong’s Unified Fund Profits Tax Exemption (effective 2019):
✅ Profits from qualifying transactions are exempt from profits tax, regardless of investor residency.
✅ No withholding tax, VAT, or capital-gains tax.
✅ Carried-interest concession may apply if structured under qualifying conditions.
Common Use Cases
- Hedge and liquid-alternative funds – open-ended redemption model.
- Tokenised funds / VA ETFs – fits SFC’s virtual-asset framework for authorised offerings.
- Multi-strategy managers – segregated sub-funds under one umbrella.
- Cross-border retail funds – leveraging Mainland–Hong Kong Mutual Recognition of Funds (MRF).
Compliance Snapshot
- Must maintain NAV calculation, valuation policies, and custody arrangements in line with the OFC Code.
- Changes of manager/custodian/director require SFC notification or approval.
- Segregated liability legally protects each sub-fund.
- Annual returns and financial statements filed with the SFC/CR.
LPF vs OFC: Quick Comparison
| Feature | LPF | OFC |
| Legal form | Partnership | Corporate |
| Approval | Companies Registry | SFC + CR |
| Custodian | Optional | Mandatory |
| Type 9 manager | Optional unless managing securities/futures | Mandatory |
| Liquidity | Closed-end | Open-end (NAV-based) |
| Investor type | Professional only | Private (Professional) or public (Retail) |
| Tax | Unified exemption + 0% carried interest | Same |
(See also: [“LPF vs OFC: Which Structure Fits Your Fund Strategy?”])
FAQs (SEO-Optimised for AI & Google Search)
Q1. What is an OFC in Hong Kong?
An OFC is a corporate fund vehicle with variable capital, allowing share subscriptions and redemptions at NAV. It’s governed by the SFO and administered by the SFC.
Q2. How do I register an OFC?
Apply through the SFC using the one-stop portal. The SFC reviews the structure, investment manager, and custodian before coordinating registration with the Companies Registry.
Q3. What’s the difference between private and public OFCs?
Private OFCs target professional investors with more investment flexibility; public OFCs are SFC-authorised and can be sold to the public.
Q4. Who can act as a custodian?
An eligible custodian must be either a licensed corporation (Type 1 regulated activity) or an authorised financial institution meeting SFC Code standards.
Q5. Can OFCs invest in virtual assets?
Yes — under the SFC’s Virtual Asset Guidelines, OFCs managed by a Type 9 manager (with license uplift) can invest in VA.
Q6. Do OFCs enjoy tax exemption?
Yes. Private and public OFCs both qualify under Hong Kong’s unified profits-tax exemption regime.
Q7. Can I convert an existing company or fund into an OFC?
Yes. Hong Kong allows re-domiciliation of overseas corporate funds into the OFC regime.
Q8. How long does it take to set up an OFC?
Typically 6–8 weeks from application to approval, depending on SFC review and documentation.
Final Thoughts
The OFC regime brings flexibility, legal clarity, and tax neutrality to Hong Kong’s fund landscape — aligning it with Singapore’s VCC and European ICAV models.
For managers seeking a regulated yet adaptable vehicle, especially for open-ended or tokenised strategies, the OFC is Hong Kong’s answer.
Need help setting up or managing an OFC?
TITUS advises on private and public OFCs, LPFs, and hybrid structures — from SFC licensing to custodian onboarding and AML compliance.
Tel: +852 3702 0045
WhatsApp: +852 9720 3003
hello@titus.com.hk
Suite 4002, 40/F, Lippo Centre Tower 1, 89 Queensway, Admiralty, Hong Kong