The move comes as Hong Kong this year seen a boom in listings and trading volume amid reignited interest in China investments. Seeking to cement itself as one of the world’s largest wealth centres, the city has also eased rules to attract high-net-worth individuals over the past few years, and saw assets under management last year rise 13% to reach more than HK$35 trillion (US$4.5 trillion).
Hong Kong domiciled funds managed about HK$2.1 trillion at the end of June.
For bond funds that heavily use swaps and other derivatives, the city proposed to move to a value-at-risk approach common in Europe and the US. The new model would run parallel to the current risk model, which caps derivatives exposure at 50% of the fund’s net asset value.
The regulator also proposed to expand retail access to private market funds, which invest in illiquid assets and redeem less frequently. Following a similar relaxation for listed closed end alternative asset funds earlier in February, Securities and Futures Commission-authorised unlisted funds will be allowed to invest beyond the current 15% ceiling on illiquid assets.
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Other proposals cover liquidity management and requiring money market funds to provide a constant net asset value, among others. The market has until Jan 21 to submit comments on the new framework.
