appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Zoe SL Chan

Hong Kong’s market regulator has reclassified some of the city’s authorised funds with exposure to private market assets above a certain amount as complex products, raising the threshold for selling these products to retail investors.
Funds with exposures to direct or indirect private market assets amounting to 50 per cent or more of their net asset value would be recategorised.
The Securities and Futures Commission (SFC) said that it observed some funds gaining indirect exposure to private market assets through layered structures and complex instruments, which might lack transparency.
This structure made it difficult for retail investors to fully understand the underlying risks, the SFC said in a circular released on Thursday.
Due to low liquidity, valuation challenges and higher credit risks, funds with exposure to private credit and private equity would need to enhance their transparency regarding underlying investments and associated risks, according to the SFC.
Funds classified as complex products are subject to the SFC’s selling requirements, which include ensuring product suitability, the regulator added.
“The enhanced guidance strengthens Hong Kong’s regulatory framework for retail funds with private market exposure by increasing transparency and introducing appropriate investor safeguards,” said Elisa Ng, executive director of investment products at the SFC.
Market attention has increasingly focused on private credit market risks over the past year.
Last December, HSBC Asset Management suspended the sale of a retail fund involving private credit following questions from the market about potential hidden risks.
The regulatory decision means funds exposed to private market assets must clearly disclose three key factors in their offering documents: the extent and means of exposure, the nature and characteristics of underlying assets and the key risks, along with their potential impact on the fund and investors.
The SFC urged fund managers to review their existing funds, update offering documents as soon as practicable and maintain proper communication with distributors.
For new funds, applications may face closer scrutiny and may not be processed under the Fund Authorisation Simple Track (FASTrack).


Mainland China’s stock exchanges mount charm offensive amid Hong Kong IPO boom

For China’s hi-tech IPOs, it’s Hong Kong vs the mainland – but how much does it matter?

Betting on People-First Banking

Will fresh incentives give China’s housing market more than a short-lived rebound?

Banking & finance

Hong Kong regulator reclassifies certain funds with exposure to private markets

Victoria Harbour and the city’s skyline. Photo: Karma Lo

Hong Kong stock regulator flags more companies for share concentration

The firms cited by the SFC are small- and mid-cap stocks, with market values between HK$600 million (US$89 million) and HK$9 billion. Photo: Yik Yeung-man

Hong Kong assets hit record US$5.38 trillion on renewed China appetite: SFC

People walk through Central district in Hong Kong. Assets and wealth under management in the city have surged to a record high. Photo: Jelly Tse

China Evergrande liquidators seek judicial review of SFC agreement with PwC Hong Kong

Residents walk through a partially shuttered China Evergrande commercial complex in Beijing on January 29, 2024 - the same day the firm was ordered to liquidate by a Hong Kong court. Photo: AP

Business

Banking & Finance

News

The industry has increasingly focused on the risks of what was previously a booming private credit industry


The industry has increasingly focused on the risks of what was previously a booming private credit industry.


Hong Kong

HSBC

Financial regulation

Wealth management

Hong Kong regulator reclassifies certain funds with exposure to private markets

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The industry has increasingly focused on the risks of what was previously a booming private credit industry

The industry has increasingly focused on the risks of what was previously a booming private credit industry