New Regulatory Era on Virtual Assets Activities in Hong Kong

December 2018 | Luke Gannon and Terence Lai, DLA Piper

On 1 November 2018, the Securities and Futures Commission of Hong Kong (SFC) issued a statement, "Statement on regulatory framework for virtual assets portfolios managers, fund distributors and trading platform operators" (VA Statement) and an accompanying circular "Circular to intermediaries - Distribution of virtual asset funds" (VA Distribution Circular) (collectively, the VA Circulars), to announce a new regulatory approach on virtual assets activities, virtual assets portfolio managers and their distribution of virtual assets investment products in Hong Kong.

OFCs - A Corporate Fund Structure for Hong Kong

September 2018 | Scott Carnachan, Deacons

Sponsors who wish to establish investment funds in Hong Kong will soon have the choice of a new investment structure, the open-ended fund company (OFC). The introduction of the OFC is designed to boost Hong Kong’s development as a fund manufacturing hub. It is part of the Hong Kong government’s commitment to enhance Hong Kong as an asset management centre.

Interview with Wang Qiang, CIO at Pinpoint Asset Management Limited

March 2017 | Eurekahedge

Founded in 1999, Pinpoint is an Asia-based investment management firm that serves institutional investors, pension funds, private banks, fund of funds, family offices and high net worth individuals. Pinpoint Asset Management Limited was incorporated in Hong Kong on 4 Jun 2010 and regulated by the Hong Kong Securities Futures Commission for Type 9 (asset management) activities.

Interview with Hyung-Kyu Choi, CEO & CIO at QUAD Capital Management

October 2016 | Eurekahedge

QUAD Capital Management (QCM) was set up in Hong Kong in February 2014 as a subsidiary of QUAD Investment Management (QIM) based in Seoul. QIM, which runs US$2.5 billion AUM, had a vision, from its beginning back in 2010, to go beyond Korea in terms of investment geography as well as capital raising. QCM is the firm’s frontier to achieve this goal and currently manages QUAD’s three offshore funds of which QUAD Asia Absolvt Fund is the firm’s flagship fund. HK Choi runs QCM as CEO of the firm while managing QUAD Asia Absolvt Fund as CIO. He has total of 17 years investment experiences of which six years are in distressed debt and private equity investment followed by 11 years in public equity hedge fund industry including six years at Eton Park.

The AIFMD Third Country Passport – An Update

September 2016 | Monica Gogna, Michelle Moran, Anand Damodaran, Matthew Judd and John Young, Ropes & Gray

The European Securities and Markets Authority (ESMA) published on 19 July 2016 its final advice to the European Commission (the Commission) on the extension of the marketing passport under the Alternative Investment Fund Managers Directive (AIFMD) to 12 non-EEA countries, including the United States. This note is intended to highlight ESMA’s advice to the Commission and set out the steps firms would need to consider when applying for a third country passport.

Interview with Hyung-Kyu Choi, CEO & CIO of QUAD Capital Management

April 2016 | Eurekahedge

Hyung-Kyu Choi is the Managing Partner of Korean-based asset management firm QUAD Investment Management since January 2014. With 16 years of experience in investments, FX trading and credit analysis, Hyung-Kyu shares with us the fund's investment objective, along with his thoughts about the impact of smart watches on the industry, and display technology.

Hong Kong Profits Tax Exemption for Private Equity Funds

February 2016 | Angelyn Lim, Dechert

The Inland Revenue (Amendment) (No.2) Ordinance 2015 (the ‘Amendment Ordinance’) came into effect on July 17, 2015, extending Hong Kong profits tax exemption to offshore private equity (PE) funds.

Interview With Dr. Leung Wing Cheong, CEO & CIO of InnoFusion Capital Management Ltd

September 2015 | Eurekahedge

Holding 25 years of experience in trading and equity derivatives business in Hong Kong and the United States, Dr. Leung Wing Cheong, CEO and CIO at InnoFusion Capital Management discusses China’s intention to internationalise the renminbi and factors behind the fund’s success in achieving over 16% of returns in 2008.

Hong Kong Implements Profits Tax Exemption for Offshore Private Equity Funds

August 2015 | Austin Sweeney, Tommy Tong and Susan Leung, Herbet Smith Freehills

On 17 July 2015, the Inland Revenue (Amendment) (No.2) Ordinance 2015 (Amendment Ordinance) was published in the Gazette. The Amendment Ordinance, which takes effect retrospectively from 1 April 2015, extends the existing profits tax exemption benefiting non-residents (offshore funds) to effectively allow offshore private equity funds to take advantage of the exemption.

Hong Kong Government to Extend Existing Offshore Funds Tax Exemption to Private Equity Funds

March 2015 | Jeremy Leifer, Yuval Tal and Lynn Chan, Proskaeur Rose LLP

Introduction The Hong Kong government has announced in its latest budget a planned extension of the existing offshore funds tax exemption to bring offshore private equity funds investing in or through Hong Kong, within its scope. The scope of the amendment will not only bring private companies within the exemption, but will also include SPVs which may be Hong Kong incorporated provided they are owned by an offshore person. This is a significant and welcome development for private equity funds investing in or through Hong Kong (typically into China) that will put private equity funds on a par with hedge funds when investing in Hong Kong. It is expected that the government will introduce the draft legislation in the first half of 2015.

Interview with Shin Kiyoung, CEO at Gen2 Partners

January 2015 | Eurekahedge

Gen2 Partners (Gen2) is one of the leaders in customised Asian Hedge Funds for Institutional Investors and Family Offices, in addition to being a trusted partner to help manage investors’ exposure to Asia across all Asian alternative strategies.

Hedge Funds in APAC: Legal and Regulatory Treatment

March 2014 | Gareth Pyburn, InsightLegal Asia Consulting

There continues to be great interest in and steady growth of hedge funds in APAC, which is driven by both market and regulatory factors. Hong Kong and Singapore remain the two most competitive jurisdictions in terms of attracting funds and fund managers; however, each has its own particular strengths and disadvantages. InsightLegal Asia Consulting specialises in ‘clarifying complexity’ and below we provide some guidance on how regulatory initiatives in Asia-Pacific are affecting the development of different types of fund and hedge fund structures in APAC.

Key Points for Hong Kong and Other Asian Hedge Fund Managers About AIFMD

June 2013 | Rolfe Hayden and Maureen Gleeson, Simmons & Simmons

The European Directive on Alternative Investment Fund Managers (AIFMD)1 came into force on 21 July 2011. It is now required to be implemented into the national laws of the 27 Member States of the European Union (EU) and the 3 additional European Economic Area (EEA) states (Norway, Iceland and Liechtenstein) by 22 July 2013.

Hong Kong: Islamic Finance Getting There Little by Little

February 2013 | Bryant Edwards, Craig Nethercott and Nomaan Raja, Latham & Watkins

With the platform for an Islamic finance offering in Hong Kong almost complete, what are the prospects for the growth of the Islamic finance sector in Hong Kong? Bryant Edwards, Craig Nethercott and Nomaan Raja ask whether the region has the capacity to foster an Islamic finance sector.

The Awakening of the Dragon

December 2012 | Amirullah Haji Abdullah, NOVA Training and Education Institute

Hong Kong has yet to make its mark on the Islamic finance sector, with limited interest from industry practitioners. However, taking a page out of Malaysia in terms of education and training could provide new impetus to the sector. Amirullah Haji Abdullah discusses.

Hedge Fund Interview with Vincent Lam, Chief Investment Officer of VL Asset Management Company

March 2012 | Eurekahedge

VL Asset Management, founded in January 2009, is a Hong Kong-based investment firm licensed by the Securities and Futures Commission (SFC) of Hong Kong. In its team of eight, four are investment professionals with complementary skills across fund management, equity research, equity trading, journalism and company audit

Hedge Fund Manager Regulation: Singapore to Catch Up with Hong Kong

February 2012 | Rolfe Hayden and George Hankey, Simmons & Simmons

In the blizzard of increased regulation from the United States and European Union, in particular the Dodd Frank Wall Street Reform and Consumer Protection Act and the Alternative Investment Fund Managers Directive (AIFMD), Asia’s two competing international financial centres – Hong Kong and Singapore, have traditionally taken different approaches to the further regulation of hedge fund managers. In the former, since the enactment of the Securities and Futures Ordinance (SFO) in 2003, no exempt status has been available. In the latter, there has long been an exemption for hedge fund managers. In the Special Administrative Region, since the global financial crisis the licensing regime has remained unchanged while in the ‘Lion City’ the regulatory regime is undergoing fundamental reform

Interview with Eddie Tam of Central Asset Investments

November 2011 | Eurekahedge

Central Asset Investments (CAI) is an Asia focused multi-strategy investment firm licensed by the Securities and Futures Commission (SFC) in Hong Kong. Founded in April 2005, the firm is headquartered in Hong Kong with a research office in Shenzhen, China. The CAI team consists of 17 professionals working across portfolio management, research, risk management, operations, and investor relations.

New Tax Developments Affecting Management Fees

July 2010 | Timothy Loh, Henri Arslanian and Zhao Shuyu, Timothy Loh Solicitors, Hong Kong

The Hong Kong Inland Revenue Department (IRD) recently issued Departmental Interpretation and Practice Note No. 46 (DIPN 46), which may affect the arrangements used by fund management groups to minimise tax on management fees and performance fees. In this article, we examine the current taxation position and set out defensive steps which fund management groups may take to minimise the risk of tax enforcement.

Far Eastern Promise: Can Hong Kong Become an Islamic Finance Hub?

November 2008 | Christopher F Richardson, Vinson & Elkins LLP

Hong Kong has long been considered one of the major financial hubs of Asia and indeed the world. Yet Hong Kong has never been considered an active player in the rapidly growing field of Islamic finance. This may soon change, however, if the financial authorities in Hong Kong are successful in implementing their plans to transform the city into a significant global centre for Shariah-compliant investments.

Time for Offshore Funds to Take Action to Prepare Themselves for Earning Tax Free Profits From Hong Kong

February 2006 | Florence Yip, PricewaterhouseCoopers

It has been a general perception that offshore funds making profits in Hong Kong are not taxed in Hong Kong or the Hong Kong Inland Revenue Department ("IRD") will not seek to tax the offshore funds. This perception is not entirely wrong. Funds authorised by Hong Kong Securities and Futures Commission ("SFC") and certain unauthorised funds which are "bona fide widely held" and subject to a supervisory authority in an "acceptable regulatory regime" are exempt from Hong Kong profits tax on their profits made in Hong Kong. Cayman Islands, British Virgin Islands and, ironically, Hong Kong are not in the list of "acceptable regulatory regime".

Setting up an Asian Fund Manager – Singapore or Hong Kong?

September 2005 | Nigel Poh, Eurekahedge

As assets managed by hedge funds globally pass the US$1 trillion mark, voices of the rational shadows whisper that the industry is due for a market correction. Yet fears of a bubble in the industry may be unfounded at least from an Asian perspective, which many see as an emerging opportunity-rich sector essentially catching up with the US and Europe in terms of strategy sophistication and market deployment.

The Taiwan Dimension of HKEX’s Markets

September 2005 | Research & Planning Department, Hong Kong Exchanges & Clearing Ltd

Taiwan is one of the more developed economies in Asia and has an active stock market. Given the close economic relationships and the common language, one might expect active participation from Taiwanese investors in the Hong Kong markets where many Mainland enterprises are listed. However, Taiwanese participation in the Hong Kong market remains relatively low.

Revenue (Profits Tax Exemption for Offshore Funds) Bill

August 2005 | PricewaterhouseCoopers

The Hong Kong Government published the Revenue (Profits Tax Exemption for Offshore Funds) Bill (the "Bill") on 30 June 2005. The Bill seeks to give legal effect to the Government's proposal to exempt offshore funds from Hong Kong Profits Tax after two rounds of consultation. It is scheduled for first reading by the Legislative Council on 6 July 2005.

The Japanese Dimension of HKEx’s Markets

June 2005 | Research & Planning Department, Hong Kong Exchanges & Clearing Ltd

Japan is the world's second largest economy, and second largest stock market. Given their close geographical proximity to Hong Kong, it might be expected that Japanese investors would be major participants in the Hong Kong securities market. In particular, the Mainland China enterprises listed in Hong Kong, with their growth potential, might seem a natural choice for investors from a mature developed country. However, in reality, Japanese investment in the Hong Kong market is far below its potential.

A Consultation Period on FSTB's Second Paper on the Proposed Exemption of Offshore Funds from Hong Kong Profits Tax ends

February 2005 | Florence Yip, Partner, Tax Services, Investment Management Industry Group, PwC, Hong Kong

The Hong Kong Financial Services and Treasury Bureau ("FSTB") issued its second consultation paper on the proposed exemption of offshore funds from Hong Kong profits tax on 31 December 2004, 11 months after the first paper was issued in January 2004. It is hoped the proposed exemption will provide much needed comfort to Hong Kong fund managers' and offshore investors' uncertainty as to when offshore funds are subject to Hong Kong tax.

Securities Borrowing and Lending

December 2004 | Matthew Harrison and Ada Choi, Hong Kong Exchanges and Clearing

There has been renewed discussion in the Hong Kong market recently on the possibility of expanding the securities borrowing and lending (SBL) facility provided by Hong Kong Securities Clearing Company (HKSCC), a subsidiary of HKEx. However, commentators have differing perceptions of the value of such service, and indeed different understandings of what SBL entails. This article seeks to clarify some of these perceptions.

Hedge Fund Structures and Regulatory Positions in Hong Kong, Singapore and Japan

September 2004 | Eiichi Kanda & Tatsuhiko Kamiyama, Clifford Chance (Tokyo) LLP; Mark Shipman, Clifford Chance, Hong Kong; Choo Wai Hong, Clifford Chance Wong, Singapore

The preferred hedge fund structure for Hong Kong based managers/advisers tends to be an offshore limited liability company. The main factors determining this preference is investor familiarity and that such a vehicle is relatively low risk to the hedge fund manager i.e. it has a separate legal identity distinct from the management functions, and is easy to operate with respect to day to day subscription and redemption of shares. Furthermore, offshore jurisdictions used such as Cayman Islands, British Virgin Islands and Bermuda,are tax neutral.

Protests Grow Over HK Tax-Free Plan

March 2004 | Source: Financial Times (1 Mar 2004), Angela Mackay, Hong Kong

Opposition is growing to the terms of proposed new legislation to exempt offshore funds from taxation in Hong Kong. While the funds management industry welcomes the government's plans to implement an exemption, they are concerned that details of the legislation will drive business away.

Hedge Funds - Hong Kong Legal Perspective

December 2003 | James Walker / Mark Shipman, Clifford Chance

This article explains the types of investment vehicles most commonly used for establishing hedge funds and sets out the possible regulatory requirements imposed on hedge fund managers/investment advisers under the Securities and Futures Ordinance ("SFO"). The article assumes that the hedge funds will not be marketed or offered "to the public" in Hong Kong and therefore will not need to be authorised by the Securities and Futures Commission ("SFC"), nor comply with the SFC Hedge Fund Guidelines, which regulates the "public" offering of hedge funds in Hong Kong.

Hedge Fund Registration in Hong Kong Proving Difficult

April 2003 | Ray Heath

Serious differences are emerging between Hong Kong's markets watchdog and hedge fund managers queuing up to have their products authorised for retail sale. After winning plaudits for breaking new ground in international financial markets by allowing hedge funds to be offered to the public, the Securities and Futures Commission is now being criticised for putting obstacles in the way of new players.

Departure of Roger Ellis from JF Funds

March 2003 | Ray Heath

The sudden departure of Roger Ellis as Chief Investment Officer of JF Funds in Hong Kong jolted the local fund management community. Ellis insisted he was leaving the firm for personal reasons, but the rumour mill linked his departure with that of Blair Pickerell, who had exited as chairman just weeks before Ellis.

Hong Kong - Taxation of Hedge Funds

October 2002 | Ray Heath, SCMP

Hong Kong wants more fund managers. It's in danger of having fewer if the threat of taxation now hanging over the industry is not removed soon. Threats of an exodus to Singapore, Hong Kong's traditional arch-rival in the battle to attract funds; have been bandied around as the Inland Revenue continues to circle the industry. Anxious managers have banded together, backed by the Alternative Investment Managers' Association in a bid to persuade the government to call the tax-man off the industry.

Hong Kong - Hedge Funds for the Retail Market

October 2002 | Eurekahedge

On the 28th of November the Hong Kong Securities and Futures Commission authorised the first retail alternative investment funds for the Hong Kong market. Two single-strategy hedge funds from JF Asset Management and one fund of funds from the HSBC stable of products have been approved by the regulators for sale to retail investors.

Hedge Funds - Their Contribution to Securities Markets

July 2002 | Matthew Harrison, Hong Kong Exchanges and Clearing Ltd

In the third quarter of 2002, it is expected that Hong Kong retail investors will be permitted to buy hedge funds. Recognising increasing retail interest in alternative investment, Hong Kong's Securities and Futures Commission (SFC) has released guidelines for authorisation of retail hedge funds. This marks a recognition by the Hong Kong authorities of growing worldwide interest in the sector.

Retail Hedge Fund Regulation Update

July 2002 | Ray Heath

The pace of Hong Kong's race to put hedge funds onto the retail market is slowing. Although a small, but still significant queue has formed to register products, some unexpected potholes have appeared as managers, lawyers and the regulators attempt to reconcile differing requirements. That there would be teething troubles was seen as inevitable, given the pioneering aspect of the Securities and Futures Commission's initiative in opening the way for hedge funds to be offered to the wider public. The SFC was having to set standards that would allow freedom of fund management while ensuring maximum investor protection. No precedent was available, as in other jurisdictions hedge funds remain exempt products, although Singapore has also taken steps to regulate the public offering of the vehicles.

Interview with David Webb, Fund Manager of Hidaro Fund

July 2002 | Matt Schmidt, Eurekahedge

David Webb founded Wellam Investment Ltd. in March 2000, the firm is based in Hong Kong. Prior to establishing Wellam, Webb was MD and head of Asian equities at Chase Asset Management in Hong Kong since 1992. David currently runs the Hidaro Fund, a Japan equity long/short fund employing both a relative value and directional strategies. David is supported by Hitomi Sugino who previously worked with David at Chase and has been in the Japanese securities market since 1982. The Hidaro Fund was launched in February 2001, prior to which David and Hitomi were running a segregated account with the same strategy. The Hidaro Fund was -1.64% for July 2002 and is +2.70% YTD at the end of July.

Asian Hedge Funds - First Half Yearly Report

June 2002 | Matt Schmidt, EurekaHedg

After the disastrous market conditions in 2000 and the first nine months of 2001 pushed Asian hedge funds down, the last quarter of 2001 proved a nice rebound for the industry. Managers made money throughout the region, from playing the falling yen in Japan (either outright US dollar long or purchasing exporters) and buying bank shares in Korea, to domestic plays in Southeast Asia and Hong Kong/China.

Interview with Zaheer Abbas Sitabkhan, Fund Manager of LG Asian Plus Fund

June 2002 | Matt Schmidt, Eurekahedge

Zaheer runs the LG Asian Plus Fund and has been with LGM since 1995. He has been involved in managing the fund since inception and has taken over full responsibility since June 2000. He is a graduate of Case Western Reserve University and has a MBA from Indiana University.

Selling Hedge Funds to the General Public - Australia is Ahead of the Pack

April 2002 | John Hetherington, Eurekahedge

After no-doubt considerable soul-searching, Hong Kong's Securities and Futures Commission (SFC) finally published in early May the guidelines which it will follow in determining whether a hedge fund will be authorised for public sale. This determination came eleven months after the Monetary Authority of Singapore (MAS) released its own standards. While there are similarities, the hurdles set by the SFC are much higher.

Hedge Fund Location - it matters

April 2002 | John Hetherington, Eurekahedge

We asked 16 managers, based around the world and overseeing absolute return Asia Pacific strategies, their views of where is the best location to establish a hedge fund. We gave each of them the same 12 questions (reproduced below), which centered on the investment process and capital raising. Their answers were remarkably similar, suggesting that there may be a clear formula which new, and arguably some established, managers should follow.

Long-Only Houses Are Developing a Taste For Asian Hedge Funds

March 2002 | Niall Shiner, Eurekahedge

After no-doubt considerable soul-searching, Hong Kong's Securities and Futures Commission (SFC) finally published in early May the guidelines which it will follow in determining whether a hedge fund will be authorised for public sale. This determination came eleven months after the Monetary Authority of Singapore (MAS) released its own standards. While there are similarities, the hurdles set by the SFC are much higher.