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Emerging Markets DatafileDecember 02, 2003
THE STANDARD
HONG KONG
ENGLISH
Green light for two more hedge funds, THE STANDARD
Dennis Eng
ASIA
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Hong Kong regulators gave the green light to eight retail hedge funds over the past 13 months and have cleared another two funds to be sold to investors, the Securities and Futures Commission (SFC) said.
At a conference for hedge fund managers yesterday, the SFC’s associate director of investment products, Sandra Mak, said she expected the two latest hedge funds would be ready within two months.
The SFC began authorising such retail funds in November 2002. Hedge funds targeting so-called high-net-worth professional investors are exempt from such a requirement.
In the opening speech of the two-day conference, financial secretary Henry Tang said: “We are concerned about the need to protect investors’ interests, given that hedge fund products are now increasingly being marketed to retail investors.”
Out of the 1,911 unit trusts and mutual funds authorised by the SFC up to the end of October, almost 14 per cent are alternative investment products, including hedge funds.
Last year, 29 per cent of the total number of funds managed in Hong Kong were authorised retail funds, up from 22 per cent in 2001.
“By bringing hedge funds under a proper regulatory and disclosure framework for retail sales to the public, we hope to illustrate to the industry that hedge funds can be made more transparent without undermining the effectiveness of their investment strategies. In the long run, we hope the success of authorised hedge funds will encourage more to seek authorisation,” Tang said.
Hong Kong has been eager to develop its fledgling retail hedge fund market after investors, saddled with plummeting property prices and a stagnant stock market, exited equity investments in droves.
According to Tang, an estimated US$400 billion (HK$3.12 trillion) of assets were under the control of fund managers last year. He added that total assets managed in Hong Kong rose by almost 11 per cent in 2002.
Incentives offered by the government to help increase both the number and types of hedge funds available to retail investors in Hong Kong include the recent move by the financial secretary to grant profits tax exemption to offshore funds. “The government will soon consult the industry on proposed amendments to the Inland Revenue Ordinance which are necessary for implementing the exemption,” he added.
Hong Kong Exchanges and Clearing (HKEx) is also considering exempting hedge funds from having to buy back stocks within the compulsory three-day period after the trade day to settle short-selling transactions under certain circumstances. “This provides the flexibility to deal with settlement failure arising from delay due to recalling stocks that were lent out,” Tang said. The trial period will last for six months, after which the HKEx will decide whether to make the exemption permanent.
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