On February 17, 2025, the Securities and Futures Commission ("SFC") issued a circular clarifying its regulatory requirements for the listing of closed-ended alternative funds on the Stock Exchange of Hong Kong Limited ("SEHK"). This move aligns with the Hong Kong SAR government's 2024 Policy Address to broaden private equity fund distribution. The SFC has set an expected market capitalisation of $780 million (US$100 million) for eligible funds. The SFC encourages intermediaries to ensure clients' knowledge and net worth align with the risks associated with these complex investment products.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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On February 17, 2025, the Securities and Futures Commission ("SFC") issued a circular to provide clarification on its regulatory requirements for the listing of closed-ended alternative funds on the Stock Exchange of Hong Kong Limited ("SEHK"). This guidance aligns with the Hong Kong Special Administrative Region Government’s plan to broaden private equity fund distribution as outlined in the 2024 Policy Address.
The current regulatory framework already permits alternative funds to be authorized and listed on SEHK without restrictions. Eligible alternative funds are encouraged to list in Hong Kong. Today's circular details the SFC's requirements for authorizing closed-ended funds primarily investing in private and less liquid assets.
A crucial factor is that an alternative fund seeking authorization should have a substantial size, with an expected market capitalisation of $780 million (US$100 million). Moreover, the fund should be capable of generating regular income, contingent on its investment strategy.
Ms Christina Choi, the SFC’s Executive Director of Investment Products, observed that the range and scope of investment products offered in Hong Kong are indicative of its standing as an international asset management centre. The SFC's welcoming stance towards closed-ended alternative funds could introduce a new asset class for investors aiming to diversify their portfolios by accessing private asset portfolios managed by qualified professional asset management firms.
To mitigate potential benefits and risks associated with closed-ended alternative funds, the SFC mandates intermediaries to assess clients’ familiarity with these sophisticated products before facilitating transactions. Intermediaries must also ensure clients’ net worth is proportionate to the risks assumed.
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