Private equity funds may soon be listed on the Hong Kong stock exchange, following a recent decision by the city’s pension regulator to allow them as permissible investments under the Mandatory Provident Fund (MPF). The move is expected to encourage private equity funds to raise capital in Hong Kong and expand the city’s role as a hub for alternative investments.
The Mandatory Provident Fund Schemes Authority (MPFA) added private equity funds to its approved investment list earlier this week. The decision follows a policy push in February from Financial Secretary Paul Chan, who called on alternative funds to consider listing in Hong Kong, arguing that doing so would strengthen the city’s capital markets and appeal to global asset managers.
The MPFA said its decision was in response to industry feedback urging greater exposure to alternative asset classes to reduce dependence on traditional stocks and bonds. The regulator will allow MPF constituent funds to invest in private equity funds that are listed on the Hong Kong stock exchange and authorised by the Securities and Futures Commission (SFC). Approval will be granted on a case-by-case basis, with considerations including volatility, fee structure, and compliance with MPF regulations. Initially, the MPFA will cap such investments at 10% of a fund’s net asset value.
There are currently no private equity funds listed in Hong Kong, though the regulatory framework allows for their authorisation and listing. The SFC issued new guidelines in February regarding closed-end funds investing in private and illiquid assets, stipulating a minimum market capitalisation of HK$780 million (US$100 million) and a requirement to generate regular income. These measures align with broader government efforts to widen the distribution channels for private equity products.
Industry insiders believe these regulatory clarifications will open the door for initial public offerings by private equity funds later this year, subject to market conditions. The MPFA’s move could provide fund managers with access to an untapped capital pool while giving pension members a broader range of investment opportunities.
With total MPF assets reaching HK$1.3 trillion as of March and strong performance in the first quarter, expanding asset class exposure is seen as a step toward achieving better returns and improved diversification for Hong Kong’s retirement savers.
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