Setting Up an Open-Ended Fund Company (OFC) in Hong Kong

A Hong Kong Open-Ended Fund Company offers fund managers a flexible corporate fund structure with variable capital, tax exemption benefits, and access to government grants covering up to 70 percent of eligible setup costs. This guide explains OFC registration, service provider requirements, re-domiciliation procedures, tax considerations, and how to evaluate an OFC against a Limited Partnership Fund.

Hong Kong’s Open-Ended Fund Company (OFC) regime has experienced rapid growth in recent years, with the number of registered OFCs rising from 8 in 2020 to 765 by July 2026.

That growth reflects a deliberate policy push: a Hong Kong-domiciled corporate fund structure, a government grant covering up to 70 percent of setup costs, and a tax exemption that in some respects goes further than Hong Kong’s other fund vehicle, the limited partnership fund (LPF).

This guide covers what an OFC actually is, who needs to be involved in running one, how registration works (including re-domiciling an existing offshore fund), and what the tax and funding benefits look like in practice.

What is an open-ended fund company?

An OFC is a collective investment scheme structured as a company with variable capital and established under Part IVA of the Securities and Futures Ordinance (SFO). Introduced on July 30, 2018, the regime provides Hong Kong with a corporate fund vehicle that aligns with international market practices, making it immediately familiar to global investors accustomed to company-based fund structures in other jurisdictions.

Two features distinguish an OFC from an ordinary Hong Kong company:

• Variable capital: Shares can be issued and redeemed in line with investor subscriptions and redemptions, without the capital maintenance restrictions that apply to ordinary companies.
• Umbrella and sub-fund structure: A single OFC can house multiple sub-funds under one umbrella, each with segregated liability from the others. Losses or liabilities in one sub-fund do not spill over into another.

OFCs also carry lighter ongoing formalities than a typical Hong Kong company. There’s no requirement to file annual returns or hold a mandatory annual general meeting, which keeps administrative overhead lower once the structure is running.

Public vs. private OFC: Which do you need?

An OFC can be structured as either a public or a private fund, and the distinction shapes both your regulatory burden and your grant entitlement.

Public OFCs are offered to retail investors and require prior Securities and Futures Commission (SFC) authorisation for the offering itself, in addition to OFC registration, unless a specific exemption applies. This adds a further layer of compliance on top of the registration process.

Private OFCs are offered only to professional investors or through private placement and don’t require separate public-offering authorisation. Most newly established Hong Kong OFCs, including hedge funds, private equity vehicles structured as open-ended funds, and similar strategies, are set up as private OFCs for this reason.

Both public and private OFCs can be registered as either listed or unlisted and either open-ended or, in some cases, closed-ended. The structure is flexible enough to accommodate a range of strategies, not just conventional open-ended retail funds.

Who needs to be involved in an OFC’s structure?

An OFC isn’t a self-contained entity you simply incorporate and run internally. The regime requires a defined set of service providers and officers:

• An investment manager, responsible for managing the OFC’s assets. This is typically a corporation licensed for Type 9 (asset management) regulated activity under the SFO, though certain exemptions apply in specific circumstances.
• A custodian, independent of the investment manager, responsible for safeguarding the OFC’s scheme property. The custodian must be a Hong Kong-based entity meeting the SFC’s eligibility requirements.
• Directors, who bear responsibility for the OFC’s overall governance and must satisfy the SFC’s fit-and-proper requirements.
• A registered office in Hong Kong, which is mandatory both for newly incorporated OFCs and for any offshore fund re-domiciling into the regime.

Getting this service-provider structure right before filing is one of the more time-consuming parts of setting up an OFC. The custodian and investment manager relationships need to be contractually in place before the SFC will register the vehicle, not arranged afterward.

How do you register an OFC in Hong Kong?

The SFC and the Companies Registry (CR) share responsibility for OFCs, and the two authorities coordinate through what’s officially described as a “one-stop” process:

1. The applicant submits the OFC’s instrument of incorporation and supporting documents to the SFC, alongside confirmation of the investment manager, custodian, and director appointments.
2. Documents intended for the CR, including the incorporation and business registration materials, are submitted to the SFC as part of the same application, rather than filed separately with the CR.
3. Once the SFC is satisfied that the registration requirements are met, it notifies the CR and forwards the relevant documents and fees.
4. The Registrar of Companies issues the Certificate of Incorporation and Business Registration Certificate.
5. The SFC’s registration of the OFC takes legal effect on the date the Certificate of Incorporation is issued. This is the moment the OFC is formally established.

Because the SFC and CR steps are coordinated rather than sequential from the applicant’s perspective, a well-prepared application with its service providers already lined up progresses considerably faster than one where custodian or investment manager arrangements are still being negotiated during the review.

Can an existing offshore fund re-domicile in Hong Kong as an OFC?

Yes. Under sections 112ZJB and 112ZJC of the SFO, a fund corporation established outside Hong Kong can apply to re-domicile as an OFC, provided it meets the same eligibility requirements that apply to a newly established OFC. The process follows the same one-stop logic: the SFC’s registration takes effect upon the Companies Registry’s issuance of a certificate of re-domiciliation, rather than through a separate winding-up and re-incorporation process.

The re-domiciled OFC’s registered office must be situated in Hong Kong from that point forward, and it becomes subject to the same ongoing SFC and CR requirements as a fund incorporated in Hong Kong from the outset. For fund managers already running an offshore structure but wanting a Hong Kong-domiciled vehicle – often to sit alongside other Hong Kong operations or to access the grant discussed below – re-domiciliation avoids disrupting the fund’s existing track record, investor base, and contracts in the way a full wind-up and re-launch would.

What tax benefits does an OFC offer?

OFCs benefit from Hong Kong’s unified funds exemption under section 20AN of the Inland Revenue Ordinance (Cap. 112), which exempts qualifying transactions from profits tax regardless of whether the fund is Hong Kong or non-Hong Kong resident and regardless of whether it’s centrally managed and controlled in Hong Kong.

OFCs have one advantage that the LPF structure does not. Under section 20AN(2)(c), an OFC’s exemption extends to certain assets outside the specific list in Schedule 16C of the Ordinance, provided the vehicle maintains its SFC registration and complies with the Code on Open-ended Fund Companies (OFC Code). An LPF that invests outside the Schedule 16C asset list loses the exemption on those specific transactions. This is a real structural difference worth factoring in if your fund’s strategy touches asset classes at the margins of the schedule.

Is there a government grant available?

Yes, and it’s a meaningful part of why OFC formations have grown so quickly.

The Grant Scheme for Open-ended Fund Companies and Real Estate Investment Trusts, administered by the SFC and funded by the Hong Kong government, was extended in the 2024-25 Budget and now accepts applications through 9 May 2027.

The grant covers 70 percent of eligible expenses paid to Hong Kong-based professional service providers in connection with incorporating or re-domiciling an OFC, up to:

• HK$300,000 per newly incorporated or re-domiciled public OFC
• HK$150,000 per newly incorporated or re-domiciled private OFC

Given that most eligible costs, including legal, custodian onboarding, and compliance advisory, are exactly the kind of expenses a fund would incur regardless, the grant meaningfully lowers the effective cost of choosing Hong Kong as the fund’s domicile. Applicants are encouraged to consult the SFC on eligibility before formally applying.

OFC vs. LPF: Which structure fits your fund?

Neither structure is universally “better”. The right choice depends on the fund’s strategy, target investor base, and whether the underlying assets sit comfortably within Schedule 16C.

Practical steps to set up an OFC

1. Decide on public or private status early. This decision shapes your compliance burden, target investor base, and whether you need SFC offering authorisation on top of OFC registration.
2. Arrange your investment manager and custodian before filing. These relationships need to be substantively in place for the SFC application to proceed smoothly.
3. Confirm your directors meet the SFC’s fit-and-proper requirements. Address any gaps before submission rather than mid-review.
4. Assess your asset strategy against Schedule 16C. If your fund’s strategy sits outside the traditional asset list, factor the OFC’s broader exemption scope into your structuring decision relative to an LPF.
5. Confirm your grant scheme eligibility before applying. With the scheme open until 9 May 2027 and covering 70 percent of eligible Hong Kong-based service provider costs, this is worth confirming with the SFC early rather than as an afterthought.
6. Decide whether re-domiciliation or fresh incorporation fits better. An existing offshore fund with a valuable track record and investor relationships may be better off re-domiciling than restarting from scratch.
7. Plan for ongoing OFC Code compliance, not just the registration moment. Maintaining the tax exemption’s broader scope depends on continued SFC registration and code compliance, not a one-time qualification.

Where to Next?

Hong Kong’s OFC regime has matured from a new option in 2018 into a genuinely competitive fund domicile choice, backed by a government grant that materially offsets setup costs through mid-2027. The decision that matters most isn’t whether to use Hong Kong. It’s whether an OFC’s corporate, umbrella-and-sub-fund structure actually fits your strategy better than the LPF’s partnership model, particularly once your asset mix and tax exemption scope are factored in.

Frequently asked questions (FAQs)

What’s the main difference between a public and a private OFC?

A public OFC is offered to retail investors and needs separate SFC authorisation for the offering itself, in addition to OFC registration. A private OFC, offered to professional investors or via private placement, doesn’t need that additional authorisation, which is why most newly formed OFCs are structured as private.

Does an OFC need a licensed investment manager?

Generally, yes. The investment manager is typically required to hold a Type 9 (asset management) licence under the SFO, though specific exemptions can apply depending on the circumstances. This should be confirmed as part of your structuring, not assumed.

Can I convert an existing offshore fund into a Hong Kong OFC?

Yes, through re-domiciliation under sections 112ZJB and 112ZJC of the SFO. The fund must meet the same eligibility requirements as a newly established OFC, and its registered office must move to Hong Kong, but the process avoids winding up and relaunching the fund from scratch.

How much does the government grant actually cover?

The government grant covers up to 70 percent of eligible expenses paid to Hong Kong-based service providers for incorporation or re-domiciliation, with a cap of HK$300,000 for a public OFC and HK$150,000 for a private OFC. The scheme accepts applications until 9 May 2027.

Is an OFC always better than an LPF for tax purposes?

Not necessarily. It depends on your asset strategy. An OFC’s unified funds exemption can extend to assets outside Schedule 16C, provided it stays SFC-registered and OFC Code compliant, while an LPF’s exemption is limited to Schedule 16C assets. For a fund strategy that sits entirely within Schedule 16C, this difference may not matter much in practice.

Do OFCs need to file annual returns like an ordinary Hong Kong company?

No. OFCs are not required to file annual returns or hold a mandatory annual general meeting, which reduces ongoing administrative burden compared to a standard private company, though other reporting obligations under the OFC Code still apply.

How Dezan Shira & Associates can help

Choosing between an OFC, an LPF, or an offshore structure altogether depends on strategy, asset mix, and investor base, not a single “right answer” that applies to every fund. Dezan Shira’s Hong Kong team helps managers assess which structure fits, coordinates the SFC and Companies Registry process, and manages Grant Scheme applications from start to finish. Contact us for tailored support.