Chinese and HK state investors may well expect private fund firms to use the new limited partnership regime, for which a proposal is imminent, says a lawyer involved in the process.
Last week mainland regulators handed private fund management licences to Invesco and Value Partners, and eased foreign-ownership limits on financial services firms.
Beijing's new draft rules for private funds do not mention regulating these products' investing into non-standard assets, which could let them conduct corporate lending, said observers.
Consultancy CompliancePlus has raised concerns about Hong Kong's proposed rules for a new open-ended fund structure in its submission to the regulator.
Mainland hedge fund Zexi Investment and its head, Xu Xiang, have been blacklisted – and sources say more big cases are about to break.
The fund house is the first foreign firm to win approval to manufacture private funds for onshore institutional and high-net-worth clients. And further licences are in the pipeline.
Chinese investment industry executives are unhappy about how quickly local regulators have tightened policy on private funds. More clarity would help both domestic and foreign players.
The sector's average return this year is -6.74% with just 14% of private funds in positive territory. Increasing competition means they will have to work harder to prove their worth.