FinanceAsia.com published a story this week, "SFC outlines five funds priorities", in which an executive director at the Hong Kong Securities and Futures Commission, Alexa Lam, boasted of the territory's success in attracting hedge fund start-ups. Feedback from readers suggests that the picture is not so rosy.

Part of the reason for the discrepancy between Lam's cited figures and the reality is our fault. Lam was quoted while speaking at a local conference hosted by the Investment Company Institute, the American funds industry lobby. We reported, "Although the SFC authorized only five hedge funds in 2004, for a total of 13 funds managing $1.13 billion, Hong Kong also captured the largest share of start ups - more than Japan or the United States, [Lam] claims, and five times more than Singapore."

What we missed was that while Hong Kong did authorize only five funds in 2004, the rest of that sentence was supposed to refer to a private study looking at 2003. Also, Lam was talking about assets under management, not numbers of funds.

Nonetheless, having realized at our mistakes, we also have cause to be a little more sceptical about the SFC, too. In that speech, Lam called Hong Kong a success story in attracting hedge fund managers because of its legal and market structure, as well as its proximity to markets such as China and Japan, and other factors.

Market players say, however, that Hong Kong's attractiveness versus Singapore has steadily eroded. While in 2002, it attracted more start-ups, 2003 was a dead heat: each city hosted 11 start-ups. Singapore drew ahead in 2004, where 24% of the Asia-Pacific region's start-ups opened, versus only 14% for Hong Kong. But in terms of total AUM, Hong Kong remains well ahead of Singapore - about $9 billion to $3 billion, out of an Asia-Pacific total of $67 billion.

Hedge fund industry members say there are several reasons for Singapore's recent success. Hong Kong continues to be hampered by confusion over its offshore funds taxation policy - something that Lam has pledged to sort out this year - and by active measures, including incentives, by the Monetary Authority of Singapore to woo prime brokers and other builders of market infrastructure. But the biggest issue is registration.

This is ironic, since Lam's speech also boasted of Hong Kong's ranking as the world's most competitive market by the US-based Heritage Foundation, a think tank. Whatever the merits of that ranking, it does not seem to apply to the hedge funds industry: both jurisdictions require managers to register as investment advisors in order to trade securities, but this process takes four to six months in Hong Kong, versus 14 business days in Singapore. This explains why we have been reporting over the past year about the arrival of big American hedge funds, such as Tudor, Everest and Rohatyn - all setting up in Singapore, not in Hong Kong.

We are alerting readers that we made a mistake in our reporting. The SFC may want to consider clarifying its message, too.