SFC says it supports the listing of alternative funds

The Securities and Futures Commission said it supports the listing of alternative funds to broaden investor choice and bolster market development as it clarified its regulatory requirements in a circular.

The market watchdog clarified its requirements authorizing closed-ended funds that invest mainly in private and less liquid assets, also known as alternative funds.

A key criterion is that an alternative fund seeking authorization should be sizeable with an expected market capitalization of HK$780 million and preferably be able to generate regular income streams, depending on its investment strategy, the SFC said.

The current regulatory regime already allows alternative funds to be authorized and listed on the stock exchange without any impediments and eligible funds are welcomed to list in Hong Kong, the commission pointed out. 

To balance the potential benefits and risks associated with closed-ended alternative funds, the SFC requires intermediaries to assess clients’ knowledge of these complex products before carrying out a transaction on their behalf, the watchdog said, adding that intermediaries should also ensure their clients’ net worth is commensurate with the risks assumed.
STAFF REPORTER