Under the new ruling, Hong Kong retail investors will be able to invest in hedge funds with a 100% capital guarantee, with no minimum investment requirement. Capital guaranteed funds have grown rapidly over the last year, accounting for 90% of mutual fund sales as investors looked to secure increased returns amid low bank deposit rates.
But for fund-of-hedge funds, a minimum investment of $10,000 will be required. To ensure diversity, managers must invest in at least five underlying funds with no more than 30% invested in any individual fund. For single hedge fund strategies, perceived as having a higher risk by the SFC, investors must stump up an initial $50,000.
Single hedge fund and fund-of-hedge-fund managers also need to satisfy certain criteria, including having $100 million in assets under management and five years’ experience in hedge fund strategies. The underlying funds in a fund-of-hedge-fund do not need to be authorised by the SFC.
“Hong Kong will be one of the first few jurisdictions in the world to allow public offering of hedge funds,” said Alexa Lam, the SFC’s executive director of intermediaries and investment products.