Most “fund formation” pain is not legal theory. It’s execution.

The structure looks fine on a diagram, but then:

– bank onboarding stalls,

– counterparties ask basic questions no one prepared for,

– approvals are unclear,

– records are scattered,

– and the fund becomes unmanageable as soon as it gets busy.

This is what we mean by a “bankable” structure: a fund or private investment vehicle that can be explained, evidenced, and operated cleanly year after year.

If you’re exploring a Hong Kong structure, start with our Investment Funds practice page:

—

The 3 pillars of bankability

Pillar 1: A control story that makes sense (who can do what)

Banks and counterparties want to know:

– who has authority to instruct movements of money,

– who approves investments and disposals,

– what internal approvals exist (and whether they’re documented),

– how conflicts are handled.

This is governance, not “legal decoration”.

If you’re structuring a holding stack, our Corporate & Commercial practice often supports this layer:

Pillar 2: Records that exist before you need them

When onboarding or a review happens, you don’t get time to build records retroactively.

In practice you need:

– an approvals log (what was approved, when, by whom),

– an investor onboarding pack (CDD, declarations, source-of-wealth/source-of-funds support),

– clean accounting cadence (monthly/quarterly),

– audit readiness.

If regulatory mapping is relevant, our Regulatory practice can help:

Pillar 3: Asset and cash safekeeping mechanics (especially for OFCs)

If you’re using an OFC, custody and safekeeping design is central to whether the structure works.

Start with:

—

The “Bankable Structure Checklist” (forwardable to clients)

1) Governance Pack

– structure chart (entities + roles)

– signatory matrix (bank + internal approvals)

– delegated authority rules (what management can do without board approval)

– conflicts policy

– template minutes / written resolutions

2) AML & onboarding narrative pack

– source-of-wealth/source-of-funds narrative that matches the structure

– supporting documents organised and consistent

– investor classification approach (where relevant)

3) Operational cadence

– monthly bookkeeping rhythm

– quarterly governance review

– annual audit timeline

– compliance calendar (filings, renewals, registers)

—

Why this is where TITUS × IMSG becomes a better partner model

Many firms can draft documents.

Fewer firms help clients keep the structure clean and credible over time.

TITUS supports legal formation and operating documentation for funds:

Our sister team – IMSG supports the operating layer that keeps structures “alive”:

– company secretarial and filings,

– accounting/tax coordination,

– internal controls and reporting rhythm,

– practical readiness for banking and counterparties.

—

Which vehicle is easiest to keep bankable?

It depends on facts, but broadly:

– HoldCo + SPVs: simplest operationally if governance is designed properly.

– LPF: bankable when roles/records/authority are tight.

– OFC: bankable when custodian + investment manager sequencing is done early.

If you’re choosing, start here:

 Hong Kong Funds & Private Investment Vehicles guide

—

Next step: quick call with our Principal

If you want to discuss a client fact pattern or your firm’s recurring needs, we can set up a quick Zoom call with Michael Titus (Principal, TITUS): https://titus.com.hk/our-people/michael-titus/

Send 2–3 time slots to us via:
Email: info@titus.com.hk, or
Whatsapp: +852 9702 3003

—

Disclaimer: This article is for general information only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.

RELATED READING

– Pillar guide: Hong Kong Funds & Private Investment Vehicles guide

– LPF guide: LPF (Limited Partnership Fund) guide

– OFC guide: OFC (Open-Ended Fund Company) guide

– DIPN 61 (plain English): DIPN 61 explained (Unified Fund Exemption)

The post How to Build a “Bankable” Hong Kong Fund or Private Investment Vehicle (AML, Records, Controls) appeared first on Titus.

“0% carried interest” is one of the most misunderstood headlines in Hong Kong funds marketing.

The reality is more nuanced:

– there is a carried interest concession regime,

– it has effective dates and conditions,

– and it’s designed to reward genuine asset management activity with real substance and governance.

If you’re considering a Hong Kong fund platform, start here:

—

What is “carried interest” (plain English)?

In private equity and similar strategies, carried interest is typically the performance-linked share of profits allocated to the manager/sponsor after certain return thresholds.

This is different from:

– management fees (recurring fees for running the strategy), and

– ordinary investment returns (returns to investors).

—

The headline: 0% profits tax (but only if you qualify)

Hong Kong introduced a carried interest concession regime via legislation enacted in 2021, and the HKMA has issued guidelines on certification of funds under the relevant schedule for the carried interest tax concession.

Practical takeaway:

“0%” is not automatic. It is condition-based.

—

Why this matters for structuring

A carried interest regime affects:

– how you draft the fund’s waterfall,

– how you document “qualifying persons” and services,

– whether the operating model and governance actually match the intended regime.

This is where tax, legal documentation and operations must align.

—

Common pitfalls

Pitfall 1: assuming “LPF = 0% carry”

Vehicle choice alone is not the full analysis. The operating and qualifying conditions matter.

Pitfall 2: substance is treated as an afterthought

If you’re building a Hong Kong platform, operational substance and governance hygiene are not optional.

Pitfall 3: documents don’t match reality

If your waterfall, employment arrangements, approvals and reporting don’t align, you create avoidable risk.

This is also why we stress bankable structures and clean controls:

 How to build a “bankable” Hong Kong fund (AML, records, controls)

—

How TITUS + IMSG helps clients implement this properly

TITUS supports:

– structuring and documentation (including carry/waterfall mechanics),

– fund formation and operating agreements,

– regulatory mapping where required.

Our sister team – IMSG supports:

– operational setup and maintenance,

– governance cadence,

– accounting/tax coordination and record hygiene.

If you want to explore whether this is relevant to your strategy, start here:

—

Next step: quick call with our Principal

If you want to discuss a client fact pattern or your firm’s recurring needs, we can set up a quick Zoom call with Michael Titus (Principal, TITUS): https://titus.com.hk/our-people/michael-titus/

Send 2–3 time slots to us via:
Email: info@titus.com.hk, or
Whatsapp: +852 9702 3003

—

Disclaimer: This article is for general information only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.

RELATED READING

– Pillar guide: Hong Kong Funds & Private Investment Vehicles guide

– DIPN 61 (plain English): DIPN 61 explained (Unified Fund Exemption)

– LPF guide: LPF (Limited Partnership Fund) guide

– Bankable structures playbook: How to build a “bankable” Hong Kong fund (AML, records, controls)

The post Hong Kong Carried Interest Tax Concession: When “0% Profits Tax” Applies (and What You Must Get Right) appeared first on Titus.

DIPN 61 is the Inland Revenue Department’s “Departmental Interpretation and Practice Note” explaining how it interprets and applies Hong Kong’s profits tax exemption for funds (often called the “unified fund exemption”).

If you are advising a fund manager or a private capital group operating in Hong Kong, this note matters—not because it guarantees an outcome, but because it signals how the IRD views key concepts and conditions.

If you want help applying this to a specific structure, start here:

—

What DIPN 61 is (and what it isn’t)

DIPN 61 is:

– IRD guidance on interpretation and application of the funds profits tax exemption regime.

DIPN 61 is not:

– a blanket promise that “funds pay zero tax”,

– a substitute for analysing facts, activities, and structure design.

—

Why people search “DIPN 61” in the first place

Typically, the question behind the search is:

“Can my fund (or private investment platform) operate in Hong Kong without creating unexpected profits tax exposure?”

In practice, the answer depends on:

– whether you meet the definition of “fund” for the relevant provisions,

– the nature of transactions,

– who carries out or arranges transactions,

– how the structure is operated in real life.

—

Three common misconceptions

Misconception 1: “If it’s a fund, it’s automatically exempt”

Not necessarily. The regime is condition-based and fact-driven.

Misconception 2: “Domicile solves everything”

DIPN 61 makes clear the regime is intended to cover privately offered funds operating in Hong Kong, whether domiciled inside or outside Hong Kong—subject to conditions. Domicile is not the only variable.

Misconception 3: “We’ll deal with tax after launch”

This is where problems start. If documents, operations and governance don’t match, you create unnecessary risk.

That’s also why we push “bankable structure” thinking early:

 How to build a “bankable” Hong Kong fund (AML, records, controls)

—

Practical takeaway: how to use DIPN 61 in real structuring work

We typically use DIPN 61 as part of a larger “design pack”:

– define whether the structure is truly operating as a fund,

– map how transactions are sourced, executed and documented,

– ensure agreements reflect actual operations,

– design governance and record-keeping so you can evidence reality.

If you’re still choosing between LPF vs OFC vs a holding/SPV stack, read:

 Hong Kong Funds & Private Investment Vehicles guide

—

Next step: quick call with our Principal

If you want to discuss a client fact pattern or your firm’s recurring needs, we can set up a quick Zoom call with Michael Titus (Principal, TITUS): https://titus.com.hk/our-people/michael-titus/

Send 2–3 time slots to us via:
Email: info@titus.com.hk, or
Whatsapp: +852 9702 3003

—

Disclaimer: This article is for general information only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.

RELATED READING

– Investment Funds practice: Investment Funds practice page

– LPF guide: LPF (Limited Partnership Fund) guide

– OFC guide: OFC (Open-Ended Fund Company) guide

The post DIPN 61 Explained (Plain English): Hong Kong’s Profits Tax Exemption for Funds (“Unified Fund Exemption”) appeared first on Titus.

An OFC is often described as Hong Kong’s “corporate-style” fund vehicle. That’s true—but it’s also the reason OFCs require more upfront sequencing than many clients expect.

For private OFCs, two topics decide whether your structure works in real life:

1) investment manager setup, and

2) custody/safekeeping design.

If you’re still choosing between LPF vs OFC vs a holding/SPV stack, start here:

Hong Kong Funds & Private Investment Vehicles guide

—

What is an OFC (in plain English)?

An OFC is a fund vehicle in corporate form that can be set up as:

– a single OFC, or

– an umbrella OFC with sub-funds (ring-fenced compartments).

It’s often used when corporate governance optics, share-based ownership, or umbrella/sub-fund structuring are desirable.

—

The investment manager issue (plan early)

For OFCs, the investment manager setup is not an afterthought.

The SFC’s OFC Code notes that an OFC is required to have an investment manager and that the investment manager is required to be licensed/registered for Type 9 regulated activity. 

If you need help mapping this in practical terms, our Regulatory practice can help:

—

Custodian requirements: what “safekeeping” really means

A custodian is mandatory and must be approved by the SFC is required for setting up the OFC pursuant to the SFC’s OFC Code. For private OFCs, the SFC’s OFC Code includes an appendix setting out “Requirements for safekeeping of private OFC scheme property”, and notes that custodians of private OFCs should comply with those requirements.

In practice, “custody” affects:

– which asset types you can hold cleanly,

– how cash movements are controlled,

– what audit trail exists,

– whether banking and counterparties view the structure as credible.

If your custodian choice does not match the asset strategy, OFC implementation becomes painful.

—

Practical compliance design (what you should build before launch)

We recommend designing these upfront:

1) Operating procedures

– subscriptions/redemptions (even private vehicles need clean mechanics)

– valuation cadence and method (especially for illiquid assets)

– dealing day rules (if any)

– conflicts policy and approvals

2) Governance pack

– board approvals matrix

– signatory matrix (bank instructions + internal controls)

– minutes/resolutions templates

– reporting cadence and escalation rules

3) Record-keeping and audit trail

If you can’t evidence decisions and money movement cleanly, you get friction:

– with banks,

– with auditors,

– with investors (even “friendly” ones),

– and in disputes.

This is exactly why “bankable structure” thinking matters:

 How to build a “bankable” Hong Kong fund (AML, records, controls)

—

OFC vs LPF: which is typically simpler?

– LPF is usually simpler for closed-end private funds with partnership economics:

– OFC can be compelling where corporate form, umbrella/sub-fund structure, or share mechanics are important—assuming you can sequence the investment manager and custodian properly.

—

Common pitfalls we see (and how to avoid them)

Pitfall 1: “We’ll decide the custodian later”

This usually backfires. Custody drives operations, documentation, audit trail and bank narrative. Most importantly, the SFC requires every OFC to appoint a custodian.

Pitfall 2: mismatched documents vs reality

Offering docs say one thing. The operating team does another. That gap is where problems start.

Pitfall 3: treating OFC like a normal company

An OFC is a fund vehicle; it requires fund-grade operational hygiene.

—

How TITUS + IMSG supports private OFCs

TITUS supports fund formation and operating documentation, including:

– investment management/advisory arrangements

– administration arrangements

– custody arrangements

– fund-related corporate transactions

(See our Investment Funds practice page: https://titus.com.hk/investment-funds/)

Our sister team – IMSG supports ongoing operational running:

– company secretarial + filings

– accounting/tax coordination

– reporting cadence and record hygiene

– practical “bankability” support

—

Next step: quick call with our Principal

If you want to discuss a client fact pattern or your firm’s recurring needs, we can set up a quick Zoom call with Michael Titus (Principal, TITUS): https://titus.com.hk/our-people/michael-titus/

Send 2–3 time slots to us via:
Email: info@titus.com.hk, or
Whatsapp: +852 9702 3003

—

Disclaimer: This article is for general information only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.

RELATED READING

– Pillar guide: Hong Kong Funds & Private Investment Vehicles guide

– LPF guide: LPF (Limited Partnership Fund) guide

– DIPN 61 (plain English): DIPN 61 explained (Unified Fund Exemption)

– Bankable structures playbook: How to build a “bankable” Hong Kong fund (AML, records, controls)

The post The Open-Ended Fund Company (OFC) in Hong Kong: Custodian Requirements & Ongoing Compliance (Private OFCs) appeared first on Titus.

If you’re advising a family, founder, or private capital group with Asia exposure, “just set up an entity” is rarely the hard part. The hard part is building a structure that is:

• legally coherent,
• operationally clean, and
• explainable to banks and counterparties.

This guide is a practical overview of the most common Hong Kong options—how to choose between them, and where deals typically go wrong. If you want to speak to our team about a specific fact pattern, start with our Investment Funds practice page here: Investment Funds practice page

The quick map: LPF vs OFC vs HoldCo + SPVs

Option 1: Holding company + SPVs (the “private investment platform” for most families)

Best when you want a straightforward private investment vehicle to hold assets (portfolio investments, operating companies, property SPVs, co-invest positions) without running a fund-style subscription/redemption model.

Typical characteristics:

– one HK holding company (or a small stack),

– SPVs per asset or strategy,

– governance rules (approvals, signatories, reporting cadence) designed upfront.

Option 2: LPF (Limited Partnership Fund) — private fund-style wrapper

Best when the vehicle behaves like a private fund:

– pooled capital,

– multiple investors (even a small “club”),

– private equity / venture / credit-style economics,

– partnership governance and distribution mechanics.

Read our full LPF guide:

Option 3: OFC (Open-ended Fund Company) — corporate fund wrapper

Best when you want a corporate form fund structure, often with:

– share issuance/redemption mechanics,

– umbrella/sub-fund thinking,

– a compliance design that is closer to institutional fund governance.

Read our full OFC guide:

—

“Why Hong Kong?” — reasons advisers can use without sounding like a brochure

Hong Kong remains a practical Asia hub for private capital structures because it combines:

– a mature legal and professional ecosystem,

– common-law familiarity (helpful for international advisers),

– proximity to Asia capital and banking infrastructure, and

– a growing set of fund-related regimes and guidance.

From a legal-services perspective, the biggest “why” is still execution: if the structure needs to operate with Asia banking, Asia counterparties, and multi-jurisdictional family governance, Hong Kong is often a workable centre of gravity.

(If you’re comparing Hong Kong structures or you’re setting up a fund platform, our team can help you scope the right path here: https://titus.com.hk/investment-funds/)

—

The five questions that decide the structure (90% of the time)

1) Is it really a “fund” — or just a private holding platform?

If investors pool money and a manager runs the strategy, you’re in fund logic. If it’s a family/founder investment platform, a HoldCo/SPV stack may be cleaner.

2) Do you need subscriptions/redemptions (open-ended behaviour)?

If yes, OFC becomes more relevant. If no (closed-end), LPF or HoldCo/SPVs are often more natural.

3) How many investors are there (and how sophisticated)?

A family-only vehicle often prioritises operational simplicity. A club/co-invest vehicle often benefits from LPF mechanics and clearer partner rights.

4) What does the bank need to see?

If your structure can’t be explained and evidenced, onboarding stalls. That’s why “bankability” is not a footnote.

(We cover this in detail here: /bankable-hong-kong-fund-structures-aml-controls/)

5) Are you aiming for any Hong Kong fund tax regimes?

If your vehicle is truly operating as a “fund” and meets the relevant conditions, Hong Kong’s profits tax exemption guidance becomes relevant. Start with our plain-English note:

 /dipn-61-hong-kong-profits-tax-exemption-for-funds/

—

Typical timelines (realistic planning)

Every case differs, but these are the planning ranges we see most often:

– HoldCo + SPVs: usually fastest legally; banking and operational setup often drives the real timeline.

– LPF: manageable once key roles are lined up and the LPA terms are clear.

– OFC: more sequencing-heavy; custodian and investment manager decisions should be made early.

—

Common pitfalls (and how to avoid them)

Pitfall 1: building a “paper structure” that doesn’t match real life

If actual control is different from what documents say, problems appear in banking, audits, disputes, and exits.

Pitfall 2: choosing the vehicle before defining governance

The structure should follow the governance plan (who approves what, who can sign, what reporting is required).

Pitfall 3: ignoring the operational layer

Entity maintenance, accounting/tax coordination, record-keeping, and approval logs are what keep the structure alive.

Our Corporate & Commercial practice often supports the “holding and governance” side of these projects:

Our Regulatory practice supports compliance and risk mapping when the facts require it:

—

How TITUS typically supports these structures (the “HK desk” model)

TITUS supports legal design and implementation:

– vehicle selection (LPF vs OFC vs SPVs),

– formation documentation and agreements,

– fund formation and operating documentation,

– regulatory mapping where needed,

– transactions, restructurings, and dispute planning.

Our sister company – IMSG supports the running of the structure:

– company secretarial and filings,

– accounting/tax coordination,

– ongoing operational cadence (records, approvals, reporting),

– practical “bankability” support.

If you’re exploring Hong Kong for a client, start here:

—

Next step: quick call with our Principal

If you want to discuss a client fact pattern or your firm’s recurring needs, we can set up a quick Zoom call with Michael Titus (Principal, TITUS):

Send 2–3 time slots to us via:
Email: info@titus.com.hk, or
Whatsapp: +852 9702 3003

—

Disclaimer: This article is for general information only and does not constitute legal advice. Specific advice should be sought for your particular circumstances.

RELATED READING

– LPF guide: https://titus.com.hk/the-limited-partnership-fund-lpf-in-hong-kong-a-complete-guide/

– OFC guide: https://titus.com.hk/the-open-ended-fund-company-ofc-in-hong-kong-what-you-need-to-know/

– DIPN 61 (plain English): https://titus.com.hk/dipn-61-hong-kong-profits-tax-exemption-for-funds/

– Carried interest (0% profits tax): https://titus.com.hk/hong-kong-carried-interest-tax-concession-0-profits-tax/

– Bankable structures playbook: https://titus.com.hk/bankable-hong-kong-fund-structures-aml-controls/

The post Hong Kong Funds & Private Investment Vehicles: A Practical Guide for Families, Founders and Private Capital (2026) appeared first on Titus.

For many crypto investors and traders in Hong Kong, the promise of digital-assets brings opportunity — but recent enforcement shows a harsh truth: you can be both a victim and a suspect. One moment you believe you’re participating in a legitimate trade; the next you may face inquiries from law enforcement under the Organised and Serious Crimes Ordinance (OSCO) or allegations of fraud.
Here at TITUS we have helped clients who never intended wrongdoing, yet find themselves in the middle of complex crypto investigations. This article explains how that happens, what you should do, and why you need specialised legal support.

Why the Victim ↔ Suspect Line Blurs in Crypto

The mechanics behind investigations

• According to the Hong Kong Police Force (HKPF), money-laundering operations in HK sometimes use bank accounts + crypto exchange accounts to process crime proceeds. For example, one ring laundered approx. HK$118 million using 500 “mule” bank accounts and crypto exchange conversion.
  
• A real victim may have transferred funds in good faith, but that payment touches or originates from what becomes a flagged account — this can prompt investigations under OSCO’s “dealing with proceeds of crime” provision (s.25).
  
• Investigations can escalate rapidly: for example, the unlicensed exchange JPEX case in 2023 saw thousands of victims and losses over HK$1.5 billion; investors who thought they were legitimate users ended up part of a police inquiry.
  

Two typical patterns where you may be a victim and a suspect

1. Good-faith transaction becomes tainted – You traded tokens with someone you knew, later payment comes via a different account, and it turns out that different account is linked to fraud. Although you believed you were trading normally, you may face a “dealing” investigation.
   
2. Platform failure / freeze triggers risk – You invested in a platform that collapses or is unlicensed. Your assets or bank account get frozen. Even as a victim of the collapse, you may be treated as a suspect (or at least your funds may be subject to investigation) because of the nature of the transactions and tracing required.
   

Legal Framework in Hong Kong: Key Offences & Risks

* Penalties vary by case; always seek legal counsel.

Importantly: Even if you were unaware of wrongdoing, the question becomes: “Should you have known?” The “reasonable grounds to suspect” test is central in money-laundering investigations.

Warning Signs That Could Trigger Being Investigated

• Your bank account receives or sends funds connected to an account later flagged by authorities.
  
• A crypto platform with unverified licence status, unclear KYC, or sudden change of terms.
  
• Multiple transfers from or to third-party wallets/accounts you did not originally contract with.
  
• Your tokens or funds are frozen by the platform or bank without clear explanation — signalling that the institution may be under investigation.
  
• You’re asked by a platform or counterparty to handle funds for someone else, or act as intermediary — opening risk of being a “mule” account.
  
• You cannot withdraw or request further transparency in relation to your trades or payments.
  

What to Do Immediately if You Realize You Might Be Under Investigation

1. Stop all movement of the questioned funds or tokens. Further transactions may aggravate your exposure under OSCO s.25.
   
2. Assemble your file: transaction records, wallets, counterparties, verification you performed, communications. Showing you acted in good faith is key.
   
3. Engage proper legal counsel experienced in crypto-fraud/money-laundering in Hong Kong. You need a firm like TITUS which understands both victim-and-suspect dynamics.
   
4. Communicate carefully: Before commenting to banks, exchanges or investigators, know your position. Unsuitable responses may harm your case.
   
5. Consider defending the narrative: If allegations are looming, you may need to evidence that you were a victim, not a conspirator — but timing is crucial.
   

Why TITUS Is Your Go-To Legal Partner in These Scenarios

• We have deep expertise in fintech and crypto legal frameworks, including cross-border token transactions and asset freezes.
  
• We combine investigations/dispute-resolution capability with regulatory/defence experience—helping clients who start as victims but face suspicion.
  
• We understand the Hong Kong enforcement environment (HKPF, OSCO, LNC regimes) and how to manage banks/exchanges in frozen-fund scenarios.
  
• We can work as your single point of contact for all legal angles—preserving your position, navigating disclosure decisions, and mounting a coherent defence if required.
  

Call to Action

If you believe:

• You invested in crypto and are now seeing freezes or being contacted by law enforcement;
  
• You transferred or received funds that may now be under scrutiny;
  
• You’re unsure whether you’re a genuine victim or now treated as a suspect …
  

Contact TITUS immediately.

• WhatsApp: +852 9720 3003
  
• Tel: +852 3702 0045
  
• Email: info@titus.com.hk
  

Address: Suite 4002, 40/F, Lippo Centre Tower 1, 89 Queensway, Admiralty, Hong Kong

Related reading

• The Legal Fight Against Crypto Scams in Hong Kong
• CARF Is Coming: Hong Kong’s New Crypto Reporting Rules
• Contact Titus

The post Can You Be a Victim and a Suspect? Understanding Crypto Fraud Investigations in Hong Kong appeared first on Titus.

What exactly is a “fund” in Hong Kong?

Under the SFO, a fund is typically a collective investment scheme—arrangements where investors pool money/property, don’t have day-to-day control, and expect profits managed by someone else. This modern definition captures familiar ideas like mutual funds, unit trusts and private funds.

Core features (plain-English):

• Pooling: investors’ money is combined to invest at scale
  
• Professional management: usually by an SFC-licensed Type 9 (asset management) manager if management is conducted in HK
  
• Diversification & rules: the fund’s offering docs/LPA or instrument of incorporation set what the manager can do, how fees work, and investors’ rights
  
• Open-ended vs closed-ended: open-ended funds allow redemptions; closed-ended funds (e.g., PE/VC) don’t, and return capital after exits
  
• Key gatekeepers: manager, custodian/trustee, auditor, administrator (varies by structure)
  

In HK, carrying on asset management as a business generally requires an SFC Type 9 licence (with some nuances depending on activity and structure).

Common Fund Structures 

1) Unit Trust 

• What it is: Fund formed by trust deed; trustee holds assets for investors (unit-holders).
  
• Best for: Traditional retail mutual funds, passives, and some institutional mandates.
  
  

(No separate citation needed here beyond CIS definition.)

2) Open-Ended Fund Company (OFC) 

• What it is: A company with variable capital purpose-built for funds under the SFO; allows share redemptions out of capital (not possible for ordinary companies). Must appoint a Type 9 manager and a custodian.
  
• Regulation & “one-stop” setup: SFC registers or authorises the OFC and coordinates incorporation with the Companies Registry and business registration—in a single process.
  
• Use cases: Hedge/long-only strategies, liquid alts, multi-asset—anything that benefits from corporate form + open-ended liquidity.
  

3) Limited Partnership Fund (LPF) 

• What it is: A contractual limited partnership for private funds (PE/VC, credit, real assets). Requires a general partner, investment manager, responsible person (AML/CTF) and auditor; the manager must be licensed if it carries on regulated asset management in HK.
  
• Why GPs like it: Global “LP” look-and-feel (Delaware/Cayman-style economics and flexibility) with Hong Kong law and access to local concessions.
  

4) Re-domiciliation—move existing offshore funds into HK

• Hong Kong lets overseas corporate funds re-domicile as OFCs, and overseas partnerships re-register as LPFs, preserving legal continuity. Mechanisms took effect in 2021.
  

Who does what? (At a glance)

• Fund Manager (SFC Type 9 where applicable): discretionary portfolio management; subject to SFC codes (e.g., FMCC) when licensed.
  
• Custodian/Trustee: safekeeping and oversight—mandatory for OFCs (specific custodian standards apply).
  
• Administrator: NAV, transfer agency, reporting (contractual, not always mandated).
  
• Auditor: annual audit (required for LPFs).
  

How are Hong Kong funds taxed?

Unified Fund Exemption (UFE): Since 1 April 2019, privately offered funds—onshore or offshore—can enjoy profits tax exemption on qualifying transactions (subject to conditions). This is the bedrock tax rule for private funds operating in/through HK.

Carried Interest Concession: Eligible carried interest accruing on/after 1 April 2020 can be taxed at 0% profits tax for qualifying persons; there are also salaries tax concessions for employees receiving eligible carry (with employer reporting obligations).

System-wide advantages: HK’s territorial source principle + no VAT/sales tax, no capital gains tax, and no withholding on dividends/interest are central reasons managers use HK.

Picking the right structure

• Retail / daily liquidity / ETFs: typically Unit Trust or public OFC.
  
• Liquid hedge/alt strategies: Private OFC can be attractive (corporate form + variable capital).
  
• PE/VC/credit/real assets: LPF mirrors global PE economics and governance.
  
• Existing offshore fund looking to anchor in HK: consider re-domiciliation to OFC/LPF.
  

FAQs (quick hits)

Do I need a licence?
If you’re carrying on asset management in HK, yes—SFC Type 9 is generally required (nuances apply for delegation/incidental activities).

Can a foreign fund migrate to Hong Kong?
Yes—corporate funds to OFC, partnership funds to LPF, keeping continuity (subject to statutory steps).

Does Hong Kong tax my investors’ capital gains?
HK does not levy capital gains tax; funds rely on UFE for profits tax exemption (conditions apply). Always get structuring advice.

CTA: Want help choosing between LPF and OFC (or re-domiciling)? WhatsApp us at +852 9720 3003 or email info@titus.com.hk.

Related reading

• The Open-Ended Fund Company (OFC) in Hong Kong
• The Limited Partnership Fund (LPF) in Hong Kong: A Complete Guide
• Contact Titus

The post What Is an Investment Fund? Structures Explained for Beginners (Hong Kong Edition) appeared first on Titus.