A member of the Financial Services Development Council or FSDC, a government advisory body in Hong Kong, said the Hong Kong government should think about making a change in the law so that private equity funds can be established as limited partnerships. This would help enhance the fund industry of the city.
In an interview with the South China Morning Post, Florence Yip Chiu Kwai-fong, FSDC member, said a lot of the private equity funds abroad are structured as limited partnerships, a set up that is currently not available in the city. Yip said, "If the Hong Kong government would consider introducing a change in the law to allow private equity funds or certain non-retail fund products to be set up as limited partnerships, it would attract more international fund houses to set up such funds here and hence promote the fund industry in Hong Kong."
At present, Hong Kong only permits funds to be formed as a trust. According to the SCMP report, fund managers have criticized the structure as not suitable for private equity funds.
Under limited partnerships, the general partner manages and invests the funds. The general partner may choose to give these responsibilities to fund managers. Meanwhile, the investors act as passive limited partners with limited liability.
Yip told SCMP, "Such limited partnerships are popular in the US and Europe, as they allow more flexibility to investors and fund managers. The law on the mainland also allows onshore limited partnerships for private equity funds, but such structures are not allowed in most Asian cities, including Hong Kong and Singapore."
Yip, who also works as the Financial Services Tax Leader of PricewaterhouseCoopers, concentrated her work on looking for ways to promote Hong Kong's fund industry. She said the FSDC has already given the suggestion to the government. She hopes that consultation about the plan will start soon.
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