Open-ended fund company meaning Hong Kong

Open-ended Fund Company Meaning in Hong Kong

An open-ended fund company (OFC) in Hong Kong is a corporate fund vehicle authorised under the Securities and Futures Ordinance (Cap. 571). Its capital is variable. It can redeem shares on demand. An OFC’s shares do not trade on an exchange; they are bought and sold directly with the fund at prices based on net asset value. The Securities and Futures Commission (SFC), not the Companies Registry, regulates OFCs. Each must have a custodian and an investment manager holding a Type 9 licence.

Hong Kong OFC Structure

An OFC is a corporate fund structure incorporated under the Securities and Futures Ordinance. The SFC’s OFC code governs it. Every OFC must have a board of directors, a custodian and an investment manager. Unlike an ordinary company, an OFC can issue and redeem shares without complying with the share capital maintenance rules in the Companies Ordinance (Cap. 622). It may offer shares to the public under a prospectus. Alternatively, it can operate as a private fund available only to professional investors.

Open-ended Fund Company vs Umbrella Fund

An OFC can be structured as an umbrella fund containing multiple sub-funds. Each sub-fund holds a separate pool of assets and is legally segregated from the others. This segregation means the assets of one sub-fund cannot meet the liabilities of another. The structure allows investors to switch between sub-funds without selling the underlying investments. The umbrella fund remains a single corporate entity, but each sub-fund has its own investment objective, portfolio and redemption facilities.

OFC SFC Hong Kong

The SFC authorises each OFC and its offering documents. It reviews the prospectus, the investment manager’s financial standing and the custodian’s suitability. OFCs must comply with the SFC's Fund Manager Code of Conduct and the Code on Open-ended Fund Companies. A private OFC that does not make a public offering is still subject to SFC oversight. It may, however, benefit from reduced disclosure requirements.

Hong Kong Corporate Fund Vehicle

The OFC is one of several Hong Kong corporate fund vehicles, alongside the limited partnership fund and the traditional unit trust. For fund managers seeking a corporate structure, the OFC offers limited liability for shareholders, variable capital and the ability to create sub-funds. Shareholders are not liable for the fund's debts beyond their investment. The fund may redeem shares at any time, provided the redemption notice is processed at the next dealing day at the prevailing net asset value per share.