Hong Kong proposes easing fund rules to attract global managers
The move follows a boom in Hong Kong listings and trading on revived China interest
[HONG KONG] Hong Kong is proposing to ease rules for mutual funds to lure more international asset managers to set up shop in the Chinese territory.
Authorities plan to allow alternative risk models and permit private market asset funds to reach retail investors, among other proposed changes, according to a consultation paper released after the market close on Wednesday (Oct 22).
The move comes as Hong Kong this year seen a boom in listings and trading volume amid reignited interest in China investments.
Seeking to cement itself as one of the world’s largest wealth centres, the city has also eased rules to attract high-net-worth individuals over the past few years, and saw assets under management last year rise 13 per cent to reach more than HK$35 trillion (S$5.8 trillion).
Hong Kong domiciled funds managed about HK$2.1 trillion at the end of June.
For bond funds that heavily use swaps and other derivatives, the city proposed to move to a value-at-risk approach common in Europe and the US. The new model would run parallel to the current risk model, which caps derivatives exposure at 50 per cent of the fund’s net asset value.
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The regulator also proposed to expand retail access to private market funds, which invest in illiquid assets and redeem less frequently.
Following a similar relaxation for listed closed end alternative asset funds earlier in February, SFC-authorised unlisted funds will be allowed to invest beyond the current 15 per cent ceiling on illiquid assets.
Other proposals cover liquidity management and requiring money market funds to provide a constant net asset value, among others. The market has until Jan 21 to submit comments on the new framework. BLOOMBERG
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