Hong Kong’s proposed new limited-partnership fund regime, which remains a top policy priority for the government this year, is expected to attract more private equity funds and venture capital funds to the city, Financial Secretary Paul Chan Mo-po said at a forum on Wednesday.
Private equity funds and venture capital funds may become as important as banks and the IPO markets in the future by channeling capital into corporations and startups in the innovation and technology field, Chan said at the HKVCA Asia Private Equity Forum 2020, held in Hong Kong.
The new limited-partnership regime, a registration program catering to private equity funds, will diversify fund structures for investors in Hong Kong, simplify the procedures and increase efficiency of the funds that register and operate in Hong Kong
Paul Chan Mo-po, Financial Secretary of HKSAR
The new limited-partnership regime, a registration program catering to private equity funds, will diversify fund structures for investors in Hong Kong, simplify the procedures and increase efficiency of the funds that register and operate in Hong Kong, Chan said. In addition, the regime will provide elasticity in capital investment and profit distribution as well as contractual flexibility for partnerships, he said.
The new regime will be business-friendly with simple registration, but no Securities and Futures Commission authorization at the fund level, said Chris Sun, deputy secretary of Financial Services and the Treasury Bureau, during the Hong Kong panel at the forum.
Sun said that the regime has been introduced to the Legislative Council and is expected to launch this year.
Positioning Hong Kong to develop into a full-fledged fund service center, the government has been stepping up efforts to provide a more facilitative tax environment for funds and expand the fund distribution network through deepening mutual access arrangements with other major financial markets, Chan said.
At the end of the third quarter last year, Hong Kong accommodated about 560 private equity firms, with US$153 billion under management. In the last decade, Hong Kong saw an average annual growth rate of private equity firms at 6 percent.
The city is now Asia’s second-largest private equity hub after the Chinese mainland, and the market is still growing, Darryl Chan, executive director (external) and executive director (corporate services) of the Hong Kong Monetary Authority, said at the forum.
The HKMA manages HK$4 trillion (US$515 billion) in total exchange funds, of which about 6 percent is in alternative assets, including private equity, real estate and infrastructure.
Darryl Chan attributed the fast growth of the city’s private equity firms and assets under management to Hong Kong’s unique location, which offers “unparalleled” accesss to investment opportunities on the mainland.
In addition, the development of the Guangdong-Hong Kong-Macao Greater Bay Area, where high-growth and high-tech firms have emerged, further fueled Hong Kong’s role as an Asian private equity hub, he added.
