TL;DR: Hong Kong pairs deep China connectivity with global market access, modern fund vehicles (OFC, LPF), pro-fund tax rules, and a progressive stance on tokenisation and virtual-asset funds—all inside a robust, common-law regulatory ecosystem.
Proof in the numbers
- HK$35.1 trillion (US$4.53T) in total assets under management as of 31 Dec 2024, +13% YoY; net inflows surged 81% in 2024.
Why managers pick Hong Kong
1) Purpose-built fund vehicles (OFC & LPF)
- OFC: corporate, variable capital; SFC registration with one-stop incorporation; manager must be Type 9; custodian required. Great for liquid strategies and public funds.
- LPF: private-fund partnership on HK law; widely used for PE/VC/credit/real assets; manager must be licensed if it conducts regulated management in HK. Re-domiciliation in from offshore is available.
2) Tax regime designed for funds
- Unified Fund Exemption (2019)—profits tax exemption for privately offered funds operating in/through HK (conditions apply).
- Carried Interest at 0% profits tax for eligible carry (effective from 1 Apr 2020), plus salaries-tax concessions for staff.
- No VAT/sales tax, no capital gains tax, and no withholding on dividends/interest, per official government policy.
3) China connectivity + cross-border channels
- Mainland–Hong Kong Mutual Recognition of Funds (MRF) lets eligible HK and Mainland funds distribute across the boundary via streamlined vetting; quota lifted to 80% of AUM from 1 Jan 2025, spurring strong flows.
- ETF & market linkages continue to expand—supportive SFC circulars are widening product scope and research distribution to investors (e.g., ETF Connect research flexibility).
4) Progressive—but risk-based—digital asset stance
- Retail-accessible spot VA ETFs launched 30 Apr 2024, after SFC’s December 2023 circular—first in Asia to list both spot Bitcoin & Ether ETFs.
- Tokenisation framework: SFC guidance (Nov 2023; materials in 2024) enables tokenised products.
- VATP licensing under AMLO effective 1 Jun 2023; transitional arrangements completed.
- Stablecoins Ordinance (Cap. 656) in force 1 Aug 2025, establishing a licensing regime for fiat-referenced stablecoin activities supervised by the HKMA.
5) Scale, talent, and infrastructure
- Strong pipeline of managers, banks and service providers; HKMA and InvestHK underscore the city’s skilled workforce and 2024 rebound in AWM.
When does Hong Kong make the most sense?
- Public funds & ETFs needing Asia distribution and China connectivity
- Hedge/alt managers who want an onshore corporate fund (OFC) with a credible regulator
- PE/VC/credit/real assets sponsors seeking an LP-style HK vehicle (LPF)
- Global managers re-domiciling from Cayman/Singapore to leverage HK’s MRF, tax, and on-the-ground talent
A few practicalities (what to expect)
- Licensing: If management is done in HK, expect SFC Type 9 for asset management.
- Custody & governance: OFCs must appoint a custodian meeting SFC standards; LPFs must appoint an auditor; AML/CTF “responsible person” is mandatory for LPFs.
- Timeline: OFC offers a one-stop SFC/CR/IRD establishment path; LPF registration is via the Companies Registry (by HK solicitor).
CTA: Thinking about OFC vs LPF, or re-domiciling an existing fund into Hong Kong? WhatsApp +852 9720 3003 or info@titus.com.hk.