1. What is an OFC?
The OFC (Open-ended Fund Company) is a corporate fund vehicle introduced in 2018 under SFO Part IVA — Hong Kong's onshore answer to the Cayman SPC:
- Separate legal personality — it is a company: it can hold assets, contract and be sued in its own name
- Variable share capital — shares are issued and cancelled as investors subscribe and redeem, without the Companies Ordinance capital-reduction procedure — that is what "open-ended" means
- Umbrella + sub-funds — one OFC can host multiple sub-funds, each with statutory segregation of assets and liabilities: creditors of sub-fund A cannot reach sub-fund B
- Mandatory board — at least two natural-person directors, who must satisfy fit-and-proper requirements and SFC approval; public OFCs also need independent directors
- Mandatory custodian — a statutory requirement: an eligible institution under the OFC Code (bank, trust company, licensed corporation, etc.) with assets physically segregated
- Investment manager must be licensed — SFC Type 9 licensed or registered
- SFC registration — apply to the SFC; one-stop filing to the Companies Registry; public OFCs additionally need s.104 authorisation
- Since 2021, overseas corporate funds can re-domicile to Hong Kong as OFCs
2. Diagram 1: the OFC umbrella fund
One OFC hosts three sub-funds, each with its own investors, NAV, strategy and portfolio — but outwardly there is only one company, one board and one custodian.
Role by role
| Role | Level | Statutory requirements |
|---|---|---|
| Board | OFC (one) | At least two natural persons, fit and proper, SFC approval; public OFCs need independent directors |
| Sub-fund | Inside the OFC | Not a separate legal person, but assets and liabilities are statutorily segregated; issues its own share classes |
| Custodian | OFC (statutory) | Eligible institution under the OFC Code; physical segregated custody — not optional |
| Investment manager | OFC / per sub-fund | Must be SFC Type 9 licensed or registered |
| SFC / Companies Registry | Registration level | SFC registration + (public) s.104 authorisation; the instrument of incorporation is filed with CR via the SFC |
| Auditor / administrator | OFC + per sub-fund | Annual audit; NAV computed separately per sub-fund |
3. Diagram 2: public vs private OFC
Same OFC vehicle, two routes — what differs is who you sell to and the investment-scope limits.
4. Formation checklist
- Director candidates — at least two natural persons, SFC-approved and fit and proper; public OFCs need independent directors — line them up early
- Custodian is mandatory — not optional: assets must be physically held by an eligible institution; budget for the fee and onboarding lead time
- Investment manager — must be SFC Type 9 licensed or registered; if not licensed yet, start the licence application first
- Private OFC's 90% limit — investing in non-permitted assets (e.g. physical assets, direct PE) hits a wall; if the strategy does not fit, use an LPF
- Instrument of incorporation — the OFC's constitutive document, filed with CR via the SFC; amendments need SFC approval
- Re-domiciliation option — Cayman/BVI corporate funds can re-domicile as OFCs, keeping the same legal entity; investors and contracts need no re-papering
- Stamp duty — OFC share transfers fall within "Hong Kong stock"; treatment depends on the transaction type (re-domiciliation has relief) — check IRD announcements for details
5. Choosing: OFC or something else?
| HK OFC | Cayman SPC | HK LPF | Unit trust | |
|---|---|---|---|---|
| Legal form | Company · has personality | Company · has personality | Partnership · no personality | Trust · no personality |
| Sub-fund segregation | Yes · statutory | Yes · statutory (SP) | No | No (each trust stands alone) |
| Open-ended dealing | Yes · variable capital | Yes | Yes (per LPA) | Yes |
| Registrar | SFC | Cayman Registrar | Companies Registry | — (trust itself needs no registration) |
| Mandatory custodian | Yes | Not hard-coded | No | Yes (trustee) |
| Typical use | Umbrella funds · multi-sub-fund · public/private | Platform funds · captives | PE/VC · private | Retail funds · ETFs |
6. Where the benefits are
- The local SPC — one legal entity with multiple statutorily segregated sub-funds; platform funds need not incorporate a company per strategy
- Variable share capital — open-ended dealing without Companies Ordinance capital-reduction procedures; as efficient as a trust, but with legal personality
- Unified fund exemption — qualifying OFCs enjoy profits-tax exemption; re-domiciliation comes with matching relief
- Public and private routes — the same vehicle can be a retail product or a private platform
- Re-domiciliation mechanism — offshore corporate funds can move to Hong Kong without changing legal entity
7. Official sources
| Document / page | Link |
|---|---|
| SFO Part IVA (OFCs) | elegislation.gov.hk ↗ |
| Securities and Futures (Open-ended Fund Companies) Rules, Cap. 571AQ | elegislation.gov.hk ↗ |
| SFC — OFC registration and the OFC Code | sfc.hk ↗ |
| SFC — Licensing (Type 9 asset management) | sfc.hk ↗ |
| Further reading: Timothy Loh — How to Start a Hedge Fund in Hong Kong (Umbrella Funds chapter) | timothyloh.com ↗ |
8. FAQ
Is an OFC just an ordinary company?
It is a company in form (legal personality, board, shares) but a purpose-built vehicle under SFO Part IVA: variable share capital, sub-funds, OFC Code governance — none of which an ordinary company has.
Is sub-fund segregation real?
The Cap.571AQ Rules provide that each sub-fund's assets answer only for its own liabilities — statutory segregation, enforced under Hong Kong law with fewer cross-border recognition issues than offshore structures, though counterparty-jurisdiction law still matters.
Public vs private OFC?
Public: s.104 authorisation, UT Code, retail offer. Private: professional investors only, no s.104, but ≥90% of assets must be permitted classes.
Can the custodian be skipped?
No — the custodian is a mandatory statutory role; assets must be physically held by an eligible institution. This is the biggest operational difference between an OFC and an SPC.
OFC or LPF?
Open-ended, corporate, needs sub-funds → OFC; closed-end, partnership, PE/VC → LPF. They are a pair in the Hong Kong toolbox, not an either/or.