Hong Kong Authorises Retail Access To Hedge Funds

by Mary Swire, Tax-News.com, Hong Kong

03 May 2002

After a long period of consultation and much public soul-searching, Hong Kong's Securities and Futures Commission has published guidelines governing the sale of hedge funds to retail investors.

The guidelines, effective on May 17, divide hedge funds into three categories - single hedge funds, fund of hedge funds and hedge funds with a capital guarantee.

For single hedge funds, a retail investor must subscribe at least US$50,000, while funds of hedge funds, seen to be less risky, will require a minimum investment of US$10,000. No minimum investment has been set for guaranteed capital funds.

However, the SFC has imposed strict rules on managers of single hedge funds and funds of hedge funds, requiring them to have five years' hedge fund management experience, and limiting access for retail investors to fund managers with at least US$100 million worth of hedge funds under management.

Alexa Lam, the FSC's executive director of intermediaries and investment products, said that the US$100m limit might sound high, but didn't prevent smaller operators being included in funds of hedge funds.

Hong Kong is now the second Asian market after Singapore to offer hedge funds. Retail interest in such funds may be limited however due to the rules of the Mandatory Provident Fund Schemes Authority, which supervises private sector investment of social security contributions, and isn't yet prepared to change its rule against the use of hedge funds.

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