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The listing of private equity funds in Hong Kong could be on the horizon after the city’s pension regulator included them on a list of permissible investments earlier this week.
The inclusion came after Financial Secretary Paul Chan Mo-po in February encouraged alternative funds to raise financing in Hong Kong, arguing that it would make the city’s capital markets more robust and attractive to the asset management industry.
On Tuesday, the Mandatory Provident Fund Schemes Authority (MPFA) included private equity funds as permissible investments for the pension fund amid market volatility spurred by the global trade war.
The inclusion “would encourage private equity funds to list in Hong Kong due to a broader, long-term investor base like the [Mandatory Provident Fund]”, said Alfred Lam, a director at the Hong Kong Venture Capital and Private Equity Association (HKVCA), on Friday.
In a written response to the Post, the MPFA said its move was a response to “the suggestion of the MPF industry to allow scheme members to gain exposure to alternative asset classes, including private equity, thereby reducing their reliance on more traditional asset classes such as stocks and bonds, with a view to achieving better returns for MPF scheme members over the long term”.
The MPFA said it would allow an MPF constituent to invest in private equity funds listed on the Hong Kong stock exchange and authorised by the Securities and Futures Commission (SFC). The pension regulator said it would grant approval on a case-by-case basis, evaluating factors such as volatility, fees and compliance with MPF rules. It also said in the initial stage, it would limit total investments in such classes to a maximum of 10 per cent of a fund’s net asset value.
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