How Hong Kong’s new SFC rules could transform alternative asset investing
As Hong Kong’s affluent increasingly shift towards non-traditional investments, new rules could provide a boost, although investors should be aware of the risks
Hong Kong’s wealthy investors are turning to alternative assets for diversification and returns as stocks and property underperform, according to an Endowus survey last year. Nearly 90 per cent of high-net-worth investors said they wanted to increase allocations to alternative assets as they seek increased exposure to different sources of returns.
Regulators have taken note: a February 17 circular from the Securities and Futures Commission (SFC) clarified requirements for listing close-ended alternative funds on the Hong Kong stock exchange, a significant step towards diversifying the city’s investment landscape.
Close-ended funds differ from open-ended ones (such as exchange-traded funds, which can also be listed) in that the amount of shares available is fixed.
The SFC’s move allows close-ended alternative funds investing primarily in private and illiquid assets – such as private equity, private credit, infrastructure equity and infrastructure debt – to seek public listing once they meet certain requirements.
These funds fall outside the conventional investment categories of stocks, bonds and cash, and were historically available only to institutional investors and ultra-high-net-worth individuals – an elite few.