Why Are Hedge Funds Choosing Hong Kong? A Full Analysis of the Hong Kong OFC (Open-ended Fund Company) Grant Scheme and Establishment Process
As the global asset management landscape continues to evolve, Hong Kong has rapidly emerged as a preferred jurisdiction for international fund establishment, thanks to its robust regulatory framework and attractive tax incentives. Since the official launch of the Open-ended Fund Company (OFC) regime on 30 July 2018, the number of OFCs registered in Hong Kong had surged to 502 by the end of February 2025 — an 81% increase compared with the same period in the previous year. This growth not only underscores Hong Kong’s appeal as an international asset management centre, but also reflects the growing confidence of global fund managers in onshore fund structures. This guide provides a comprehensive overview of the core advantages of the OFC, the government grant scheme and eligibility criteria, the one-stop establishment process, and the professional support available from ComplianceOne.
Why Choose a Hong Kong OFC? Four Core Advantages + Government Grants
A Hong Kong OFC is a limited liability investment fund established in corporate form with variable share capital. Compared with traditional offshore structures (such as those in the Cayman Islands), it offers the following four distinctive advantages:
優勢 Advantage | 說明 Description | 對資產管理公司的價值 Value to Asset Managers |
|---|---|---|
Tax Benefits | OFCs in Hong Kong may enjoy profits tax exemption. The unified fund exemption regime covers dividends, interest and capital gains from qualifying transactions. Certain income may also qualify for tax exemption or relief. | Significantly reduces operating tax costs and helps avoid double taxation. |
Lower Costs | Compared with offshore structures, there is no need to engage dual service providers or incur the associated costs. No requirement to file annual returns or hold mandatory annual general meetings, resulting in simpler administration. | Materially lowers both set-up and ongoing annual maintenance costs. |
Facilitates International Distribution | Overseas investors are generally familiar with corporate fund structures, which better support global distribution strategies and regulatory recognition. | Enhances the fund’s acceptance and competitiveness in international markets. |
High Flexibility | An umbrella OFC provides legal “segregation of liability” protection, allowing one umbrella fund to house multiple independent sub-funds with different strategies and risk profiles. | Suitable for asset managers running multiple portfolios under a single structure. |
Additional Boost: SFC’s OFC and REIT Grant Scheme
With effect from 10 May 2024, the Government launched the “OFC and Real Estate Investment Trust Grant Scheme”. Eligible OFCs that engage Hong Kong-based professional service providers may receive a subsidy covering 70% of qualifying professional fees. The specific subsidy caps and eligibility requirements are summarised below:
基金類別 Fund Category | 資助比例 Subsidy Rate | 資助上限 Maximum Subsidy | 備註 Remarks |
|---|---|---|---|
Publicly offered OFC | 70% | HK$1,000,000 | Applicable to SFC-authorised publicly offered OFCs |
Privately offered OFC | 70% | HK$500,000 | Each investment manager may receive the subsidy in respect of a maximum of one OFC |
Privately offered OFC | 70% | HK$8,000,000 | Applicable to REITs listed on the Stock Exchange of Hong Kong with a market capitalisation of not less than HK$1.5 billion |
The Scheme covers qualifying professional service fees (such as those of lawyers, accountants and fund administrators) incurred in the establishment or re-domiciliation of an OFC or REIT in Hong Kong. The Securities and Futures Commission (SFC) is the implementation agency. Applicants may contact the SFC by email (grantscheme@sfc.hk) before submission to enquire about eligibility.
Full Analysis of the Hong Kong OFC Establishment Process
Through the SFC’s “one-stop” concurrent registration platform (processed via electronic application and the WINGS system), applicants need only submit the required documents and fees to the SFC to complete SFC registration, incorporation and business registration simultaneously.
步驟 Step | 核心任務 Core Task | 負責／提交對象 Responsible / Submission Party | 預計處理時間 Estimated Timeline |
|---|---|---|---|
Step1 | Appoint key functionaries of the OFC: directors, investment manager and custodian | Applicant’s team / law firm | Approximately 1–2 months |
Step2 | Draft the OFC’s instrument of incorporation with reference to the SFC’s template | Law firm (or legal adviser) | - |
Step3 | Complete OFC application forms and prepare required documents (instrument of incorporation, Form OFCNC1, consents of directors/investment manager/custodian, fee cheque, etc.) | SFC | - |
Step4 | Submit application via the WINGS portal together with all required documents and fees; business registration is processed concurrently | SFC | - |
Step5 | Registration and incorporation approved: SFC issues the Certificate of Incorporation and Business Registration Certificate to the Companies Registry | Companies Registry (CR) | Normally within 3 business days after receipt of documents and fees |
Regarding OFC application processing time:
-
Private OFC: Successful applicants are generally approved within less than one month after the SFC accepts the application.
-
Public OFC: Processing time depends on complexity and typically ranges from 1 to 3 months. The SFC processes registration and authorisation applications for public OFCs concurrently.
Key Step: Clarifying and Integrating the Requirements for Establishing an OFC
For private fund managers or asset management companies establishing an OFC in Hong Kong for the first time, ComplianceOne Consulting Limited, a professional firm with deep expertise in Hong Kong financial compliance, can provide the following assistance:
-
OFC structure design and compliance advisory: Designing an appropriate investment strategy and structure for your fund team to ensure full compliance with Part IVA of the Securities and Futures Ordinance (SFO).
-
One-to-one Grant Scheme eligibility assessment: Assisting in verifying whether the OFC meets the conditions of the OFC and REIT Grant Scheme.
-
One-stop registration document handling: Assisting in the preparation of application documents, the instrument of incorporation and business registration materials, and submission via the SFC’s WINGS platform.
-
Ongoing compliance and annual maintenance: Assisting with continuing filing and compliance requirements of the OFC (such as the submission of annual returns to the Companies Registry).
Q&A: Five Common Questions on Establishing a Hong Kong OFC
Q1: What are the main differences between a Hong Kong OFC and a Cayman Islands Segregated Portfolio Company (SPC)?
A: An OFC is directly regulated by the Hong Kong SFC and benefits from local tax exemptions. It offers higher regulatory transparency and better reputation, and is more readily recognised by international investors and exchanges. A Cayman SPC is a traditional offshore fund structure with higher maintenance costs and the need to engage a separate Hong Kong service team.
Q2: How long does it take for a fund to be registered by the SFC?
A: According to SFC official data, private OFCs are generally approved within approximately one month after acceptance of the application, while public OFCs typically take between 1 and 3 months.
Q3: What is the application period for the Government’s OFC and REIT Grant Scheme?
A: The Grant Scheme accepts applications from 10 May 2024 until 9 May 2027 on a first-come, first-served basis. Eligible professional fees of each OFC may be subsidised at up to 70%, subject to the applicable cap (HK$1 million for publicly offered OFCs or HK$500,000 for privately offered OFCs, depending on the category).
Q4: Does an OFC need to submit financial reports to the SFC every year?
A: Yes. All financial reports of an OFC must be submitted to the SFC within 4 months after the end of the relevant financial year.