Quick answer: OFC or LPF?
For most open-ended, securities-trading strategies — hedge funds, multi-asset, and retail-style products — Hong Kong fund managers choose the Open-ended Fund Company (OFC), a corporate vehicle with variable capital. For closed-end private equity and venture capital strategies with capital commitments and drawdowns, the Limited Partnership Fund (LPF) is usually the better fit. Both can access Hong Kong’s profits tax exemption for funds, and both can offer a credible onshore alternative to a Cayman vehicle.
If you want a structuring view tailored to your strategy, speak to TITUS about our investment funds practice.
What is the difference between an OFC and an LPF?
The two regimes solve different problems.
An OFC is an investment fund set up as a Hong Kong company with limited liability and variable share capital, so shares can be issued and redeemed as investors come and go. That open-ended flexibility makes it the natural home for liquid, tradeable strategies. The OFC has the SFC as its primary regulator and is incorporated at the Companies Registry; the regime came into effect on 30 July 2018. For a deeper walkthrough, see our OFC guide.
An LPF is a fund constituted as a limited partnership under the Limited Partnership Fund Ordinance (Cap. 637), which took effect on 31 August 2020. It has one general partner (GP) with unlimited liability for the fund’s debts and at least one limited partner (LP) whose liability is capped at its commitment. That structure mirrors the global private equity and venture capital model: capital commitments, drawdowns, and waterfall distributions. Our LPF guide covers the mechanics in detail.
In short: OFC = open-ended corporate vehicle for liquid strategies; LPF = closed-end partnership for private capital.
How is an OFC structured?
An OFC is its own legal person and must have, broadly:
- A board of at least two natural-person directors, including at least one independent director (the independent director must not be a director or employee of the custodian).
- An investment manager licensed or registered with the SFC for Type 9 (asset management) regulated activity. This is a hard requirement — the OFC cannot self-manage without a Type 9 manager.
- A custodian to hold the scheme property.
- An auditor independent of the directors, manager, and custodian.
An OFC can be set up as a single fund or as an umbrella with multiple sub-funds, with segregation of assets and liabilities between sub-funds. It can be publicly offered (subject to SFC product authorisation) or privately offered.
For how this sits within Hong Kong’s wider regulatory framework, read on.
How is an LPF structured?
An LPF is built around the GP/LP relationship:
- One general partner, which can be a natural person aged 18 or above, a Hong Kong private company, a registered non-Hong Kong company, a re-domiciled company, a limited partnership registered under the Limited Partnerships Ordinance (Cap. 37), another registered LPF, or a non-Hong Kong limited partnership with or without legal personality. If the GP is another LPF or a non-Hong Kong limited partnership without legal personality, an authorised representative is also required. The GP has unlimited liability and ultimate responsibility for managing the fund.
- At least one limited partner, whose liability is limited to its agreed commitment, provided the LP does not take part in management.
- An investment manager appointed to carry out day-to-day investment management. The manager must be a Hong Kong resident individual (18+), a Hong Kong company, or a registered non-Hong Kong company.
- A responsible person for anti-money laundering / counter-terrorist financing functions under the AMLO (Cap. 615) — this must be an authorised institution, a licensed corporation, an accounting professional, or a legal professional.
An LPF application must be filed by a Hong Kong solicitor or a Hong Kong law firm on behalf of the proposed GP, and the LPF is registered with the Companies Registry (the SFC does not register the vehicle). The partnership agreement governs the commercial terms, and it carries a high degree of contractual freedom.
If you are weighing a fund vehicle against direct co-investment or other private investment structures, our funds and private investment vehicles guide is a useful companion.
How are OFCs and LPFs taxed in Hong Kong?
Hong Kong applies profits tax on a territorial basis. The standard rates under the two-tiered regime are 8.25% on the first HK$2 million of a corporation’s assessable profits and 16.5% above that. Qualifying funds may be exempt from profits tax on exempt profits if the relevant statutory conditions are satisfied, principally under the following two reliefs:
Unified fund exemption (DIPN 61). Hong Kong’s unified fund tax exemption (effective from 1 April 2019, with IRD guidance in DIPN 61) can exempt a qualifying “fund” from profits tax on profits from qualifying transactions in specified assets (broadly securities, futures, OTC derivatives, FX and other Schedule 16C asset classes), plus limited incidental transactions (subject to a 5% incidental-transactions cap measured against total trading receipts from qualifying and incidental transactions). The exemption is structure-neutral: it can apply to OFCs, LPFs, and offshore funds, provided the statutory conditions are met. Anti-avoidance rules apply where a fund holds or controls private companies with significant short-term or Hong Kong immovable assets.
Carried interest tax concession. Eligible carried interest from qualifying private equity transactions can attract a 0% profits tax rate and a 100% exclusion from salaries tax for qualifying employees, under the concession introduced by the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Ordinance 2021, which applies to eligible carried interest received or accrued on or after 1 April 2020. Conditions typically include the fund being an LPF or SFC-authorised fund, an SFC Type 9 manager, substantive Hong Kong activity (commonly framed as at least two qualified full-time employees and at least HK$2 million of qualifying Hong Kong operating expenditure), and HKMA certification (under Schedule 16D to the Inland Revenue Ordinance). See our carried interest concession explainer.
One practical point. The carried interest concession is built around private equity and LPF-style funds, so it tends to favour the LPF for PE and VC carry. Always take Hong Kong tax advice on eligibility before relying on either relief.
When should you choose an OFC vs an LPF?
Choose an OFC if: you run an open-ended, liquid strategy (hedge fund, multi-asset, long-only) where investors subscribe and redeem; you want a corporate vehicle and limited liability for the fund itself; or you may want a publicly offered, SFC-authorised retail product, or an umbrella with multiple sub-funds.
Choose an LPF if: you run a closed-end private equity, venture capital, private credit, or real assets strategy; you want the familiar GP/LP commitment-and-drawdown model and waterfall economics; or you want to position carried interest for the 0% concession.
Many managers run both over time. An LPF for a flagship PE fund, say, and an OFC for a liquid sleeve.
How do OFC and LPF compare to a Cayman fund?
Cayman remains the default for many global managers because of its deep service ecosystem, investor familiarity, and tax neutrality. Hong Kong’s pitch is onshore substance plus competitive tax: local regulation, the unified fund exemption, the carried interest concession, government grants toward set-up costs (up to 70% of eligible costs, capped at HK$300,000 for a publicly offered OFC and HK$150,000 for a privately offered OFC, with a maximum of one OFC per investment manager; the scheme is extended until 9 May 2027 subject to the available funding pool and SFC’s case-by-case approval), and a re-domiciliation pathway that lets an offshore corporate fund migrate to Hong Kong as an OFC without changing its legal personality.
The right answer depends on your investor base, where your team and substance sit, and your tax footprint. It is a fact-specific decision, best taken with corporate and commercial and tax advice.
Comparison table: OFC vs LPF vs Cayman fund
| Feature | Hong Kong OFC | Hong Kong LPF | Cayman fund (typical) |
|---|---|---|---|
| Legal form | Company with variable capital | Limited partnership | Exempted company / SPC or ELP |
| Best for | Open-ended, liquid strategies (hedge, multi-asset) | Closed-end PE, VC, private credit | Both, depending on vehicle |
| Open / closed-ended | Typically open-ended | Typically closed-end | Either |
| Primary regulator / registry | SFC (lead regulator); incorporated at the Companies Registry | Companies Registry (no SFC registration of the vehicle) | Cayman registrar / CIMA |
| Manager requirement | SFC Type 9 licensed/registered manager | Investment manager (HK resident, HK company, or registered non-HK company) | Manager often offshore-appointed |
| Liability | Limited (corporate) | GP unlimited; LP limited to commitment | Limited (vehicle-dependent) |
| Custodian | Required | Not mandated in the same way; arranged contractually | Strategy-dependent |
| Audit | Required | Required | Required |
| Tax — fund level | Profits tax exemption possible (DIPN 61) | Profits tax exemption possible (DIPN 61) | Tax-neutral domicile |
| Carried interest 0% concession | Limited fit | Strong fit | Not a HK domestic concession |
| Public offering possible | Yes (with SFC authorisation) | Generally no (private) | Not in Hong Kong without SFC authorisation |
| Onshore HK substance | High | High | Lower |
This table is a general comparison only and simplifies several technical conditions. Verify all entries with current law and Hong Kong tax advice.
Frequently asked questions
Do I need an SFC licence to set up an OFC or LPF? An OFC must appoint an investment manager that is licensed or registered with the SFC for Type 9 (asset management). An LPF does not itself require SFC registration, but if you carry on a regulated activity in Hong Kong — including asset management — you will generally need the relevant SFC licence.
Can an LPF or OFC be tax-exempt in Hong Kong? Both can potentially access the unified fund exemption (DIPN 61) on profits from qualifying transactions, if the statutory conditions are met. Exemption is not automatic and depends on the assets traded and how the fund is structured. Take Hong Kong tax advice before relying on it.
Which structure is better for a private equity or venture capital fund? The LPF is usually the better fit for closed-end PE and VC strategies because it mirrors the global GP/LP model and is the structure best aligned with the carried interest 0% concession. An OFC can be used for closed-end strategies too, but the partnership form is more familiar to PE and VC investors.
Can I move my Cayman fund to Hong Kong? Hong Kong has a re-domiciliation pathway that allows certain offshore corporate funds to migrate and re-register as an OFC without changing legal personality. The detailed eligibility and process should be checked before you commit.
How long does it take to set up an OFC or an LPF? Timelines vary with the strategy, documents, and regulator engagement. An LPF registration through the Companies Registry can be relatively quick once documents are ready; an OFC involves SFC registration and, for public offerings, product authorisation, which takes longer. We will give you a realistic timeline at the outset.
Who can be the general partner of an LPF? The GP can be a natural person, a Hong Kong private company, a limited partnership, or another registered LPF, and bears unlimited liability for the fund. Most sponsors use a special-purpose Hong Kong company as the GP to ring-fence liability.
Does an LPF need a Hong Kong law firm to register? Yes. An LPF registration application must be filed with the Companies Registry by a Hong Kong solicitor or a Hong Kong law firm acting for the proposed general partner. TITUS can act in that capacity.
How TITUS helps fund managers
TITUS advises sponsors, managers, and family offices on setting up and running Hong Kong funds: choosing between an OFC, an LPF, and an offshore vehicle; preparing constitutional and offering documents; filing LPF registrations with the Companies Registry; coordinating SFC licensing and OFC registration; and structuring for the unified fund exemption and the carried interest concession. We act as the filing law firm for LPFs and work alongside your tax advisers throughout.
Book a consultation to map the right structure for your strategy: Book a consultation or contact us.
This article is general information only and is not legal or tax advice. It reflects our understanding of Hong Kong law as at the date of writing and may not reflect later changes. You should obtain specific advice before acting. For advice on Hong Kong fund structures, contact TITUS Solicitors.