The Revamp of Open-Ended Fund in Hong Kong

What is an open-ended fund company?

In 2018, the Hong Kong Securities and Futures Commission (SFC) introduced the legal and regulatory framework for the open-ended fund company (OFC) regime.

An OFC is an open-ended collective investment scheme which is structured in corporate form with limited liability and variable share capital. The main purpose of an OFC is to serve as an investment fund vehicle and manage investments for the benefit of its shareholders.

The OFC regime allows investment funds to be established in Hong Kong in a corporate form. Open-ended funds work in a similar way to unit trusts, and can increase or decrease their capital or the distribution of their capital without the approval of the shareholder(s) of the company.

OFC is an investment fund in corporate form domiciled in Hong Kong. It is different from unit trusts in that it is a separate legal person/entity and has a board of directors. The directors owe a fiduciary duty and statutory duty of care, skill and diligence to the OFC. The OFC’s assets will be segregated and entrusted to the custodian for safekeeping. An OFC must have an investment manager who is licenced or registered with the SFC for conducting Type 9 (asset management) regulated activity.