The Hong Kong government introduced the LPF Ordinance in August 2020, and a year later 310 Hong Kong LPFs have now been registered.
“Launching LPFs in Hong Kong is one of the key parts for the city to enhance its status as an international asset management centre,” Jiang Jingjing, founding president of Hong Kong LPF Association and partner of law firm King & Wood Mallesons told FSA.
As the name suggests, an LPF fund is structured in the form of a limited partnership which is used for pooling and managing investments.
The Hong Kong government has been keen on promoting the LPFs and it has received enthusiastic responds, Jiang said.
“I think that the LPF regime in Hong Kong will attract many professionals and talents as the government has stipulated that the managers of the LPFs must be in Hong Kong. to launch and operate LPFs,” Jiang said.
The Hong Kong LPF regime is also more attractive than similar private fund schemes in Singapore, Luxembourg and the Caribbean, because of greater tax exemptions, Li Ying, founding president of the Association and chief executive of Alpha Win Capital, told FSA.
“The costs to set up LPFs in Hong Kong are very low, only about one third or even one fifth of that in Cayman Islands,” said Li.
So far, he has launched a dozen LPFs, the majority of which have invested in biotech and “intelligent” agriculture companies in China.
LPF’s lobbying role
The Hong Kong LPF Association was launched in July 2021 with 14 founding members, including asset managers, financial and professional institutions in Hong Kong. It now has around 40 members.
Jiang said that the major function of the Association is to lobby the government on behalf of the industry. As the LPF regime is still quite new in Hong Kong, the industry constantly needs information from the authorities. Meanwhile, the government also needs feedback from industry players.
“We are sending invitations to asset managers and other financial institutions overseas, inviting them to set up LPFs in Hong Kong and also join our Association,” Li said,
At the launching ceremony of the Association, Hong Kong financial secretary Paul Chan Mo-po said that the inception of the LPF regime marks a major development in the city’s fund management industry.
The government will encourage mainland investors to use the Hong Kong LPF structure as a platform to raise capital, and to encourage investors to invest in projects in the Greater Bay Area (GBA), Chan added.