HK to work on law to attract fund houses
Hong Kong is proposing law changes to encourage more funds to incorporate in the city. The aim is to enhance its standing as an international financial centre.
Secretary for Financial Services and the Treasury Chan Ka-keung said yesterday new regulations were needed to attract more fund houses to domicile in the city, instead of the more popular Luxembourg or Dublin.
Several thousand mutual funds have a presence in the city but are mainly incorporated in Europe and get authorisation from the Securities and Futures Commission before selling investments to the public. To incorporate in Hong Kong they must set up a trustee to hold the fund, something not required in European jurisdictions.
'The current arrangement already provides sufficient regulatory protection to investors,' Chan said. 'However, if we can attract these funds to be domiciled in Hong Kong, it will create more job and business opportunities for professionals such as accountants, lawyers and other fund managers in the city.'
Chan said the government had informally collected views from fund managers and most complained that the local companies law covering funds was outdated and did not accommodate the modern structure of fund products.
'We are now studying how to change the law to meet with the fund managers' suggestions,' Chan said, adding he would go to London next month to promote Hong Kong's fund industry and yuan investment to European investors.
Eleanor Wan Yuen-yung, chief executive of the Institute of Financial Planners of Hong Kong, supported the government move.
She said many fund houses did not have a trustee, making it difficult to comply with the local law. In addition, many open-ended funds now allow investors to trade on a daily basis but this did not fit in with the law.
'The law needs to be changed soonest,' she said. 'There are many mainland and Hong Kong fund houses that would like to incorporate their funds in Hong Kong. This will be cheaper and more convenient than going all the way to be domiciled in Dublin or Luxembourg.'
Hong Kong Investment Funds Association chief executive Sally Wong Chi-ming said the initiative would further prop up the local market infrastructure. 'But ultimately the choice of a fund's domicile depends on a host of factors, such as a robust regulatory framework, tax efficiency, the availability of a pool of talent and the necessary expertise.'
Most importantly, she said the government would need to make sure the Hong Kong-domiciled funds could be distributed widely.
A fund manager, who did not want to be named, said that at present investment managers who domicile their funds in Dublin and Luxembourg could sell to markets across Europe and most of Asia.
'If a fund sets up in Hong Kong it can only sell to the seven million Hongkongers and it will not be able to compete with Luxembourg or Dublin,' the fund manager said.
ICBC (Asia) Investment Management was among the few fund houses that domiciled its funds in Hong Kong last year.