Nearly 90 Private Equity Firms Obtain Hong Kong Type 9 Licenses — What Does This License Represent?

Since the beginning of this year, leading quantitative private equity firms such as Blackwing Asset and Qianhai Bopu Asset have established affiliated entities overseas and acquired Hong Kong Type 9 licenses, securing essential permits for future international expansion. According to data compiled by Simuwang, the number of private equity firms with affiliated Hong Kong entities holding a valid Type 9 license has reached 87.

Among these, subjective strategy firms make up the largest portion with 58, followed by 20 quantitative firms and 9 mixed (subjective and quantitative) strategy firms. Industry consensus holds that acquiring a Hong Kong Type 9 license allows private equity firms to establish Hong Kong-based asset management subsidiaries or affiliates to directly manage USD-denominated funds. This facilitates both asset and liability expansion abroad. Compared to overseas asset allocation through onshore RMB funds, holding a Type 9 license is widely seen as a more representative strategic move toward globalisation.

Unlike in previous years when many firms acquired licenses without actively launching operations, this year has seen a notable acceleration in the business execution of internationalisation strategies. A representative from a quantitative firm told CLS reporters that, after obtaining the license in Hong Kong this year, the company formed an asset management team and issued products. From a diversified strategic layout perspective, Hong Kong represents the initial step, with the ultimate goal of raising capital from clients in the United States and Europe.

In terms of investment direction, most private equity firms are currently focusing on overseas fundraising aimed at A-share allocations. A quantitative executive noted that since the rebound in the “9.24” market, the recovery of A-shares and increased foreign interest in the Chinese market have created favourable conditions for private equity firms pursuing international expansion.

Nevertheless, some observers emphasize that internationalisation is a gradual process. While securing a Hong Kong Type 9 license is an important milestone, forming overseas teams, securing funding, launching products, and gaining the trust of international investors remains a long-term undertaking.

Furthermore, experts have pointed out that overseas fundraising should not be equated with true internationalisation. Fundraising alone represents a superficial level of globalisation. Genuine internationalisation involves global talent acquisition, market participation across regions, and delivering truly international asset allocation capabilities.

According to the latest data from Simuwang, the number of private equity firms holding a valid Hong Kong Type 9 license has increased to 87, with two additional quantitative firms added this year. Among firms managing over RMB 5 billion, 37 firms currently hold Type 9 licenses, accounting for approximately 43%. While these large-scale firms with established strategies and track records have an advantage, this does not preclude smaller firms from international aspirations. Among firms managing less than RMB 500 million, 36 firms are licensed, representing about 41%.

Geographically, most licensed private equity firms are located in China’s first-tier coastal cities. Shanghai leads with 29 firms, followed by Shenzhen with 21 and Beijing with 14. All other cities have fewer than 10 firms with licenses. According to industry surveys, 60% of quantitative firms express a desire to expand globally, inspired by the ambition to “see the world.”

The China Quantitative White Paper by Kuangbang Technology shows that, among 203 surveyed private equity institutions, 60% have plans to expand abroad. However, progress is pyramid-shaped, with most firms still in the early exploration phase. Around 30% are in the information-gathering stage, and only 20% have taken action—such as acquiring licenses, establishing offices, and initiating fundraising. Fewer than 2% have mature strategies and have begun successful fundraising, indicating that proven examples remain rare.

According to industry sources, most private equity firms begin their overseas expansion with license acquisition and fundraising for two key reasons. First, foreign markets offer lower interest rates, leverage options, and short-selling tools. Foreign capital is often more affordable, longer-term, and less constrained by liquidity, enabling firms to focus more on research and investment. Second, many Chinese offshore investors naturally prefer trusted domestic institutions. These firms generally raise USD funds overseas to invest in A-shares, contributing additional liquidity to the domestic market.

According to the white paper, the pace of internationalisation among private equity firms falls into three tiers. The first tier includes Hong Kong and the U.S., with nearly 60% of firms choosing Hong Kong as their initial step toward globalisation, followed by the U.S. market. The second tier comprises developed regions including Europe, Singapore, and Japan, with about 20% of firms showing clear intent.

The third tier consists of emerging Asian markets such as India, South Korea, and Vietnam. In comparison, although regions like Indonesia, Brazil, and the Middle East attract media attention, fewer than 10% of firms have targeted them for quant strategy deployments.

In general, acquiring a Type 9 license and launching fundraising represents the initial stage of internationalisation. According to actual fundraising results, some top-tier firms already manage up to USD 4 billion. Others aim to secure capital from sovereign wealth funds. Notable examples include Longqi Technology, Xiyue Investment, and Jinge Liangrui, all of which already hold substantial foreign capital. Longqi Technology, for instance, reports that international investors account for nearly 50% of its capital, with funding sources including foreign pensions, bank wealth management FOFs, and sovereign wealth funds. Additionally, 40% of its capital comes from domestic brokerages and third-party distribution, while the remainder comes from direct institutional sales and high-net-worth individuals.

In one example, during a 2024 roadshow in Singapore organised by a domestic private equity firm, participants noted that Singaporean investors are primarily composed of family offices, wealth centers, and established sovereign wealth institutions. These investors typically allocate to U.S. stocks and bonds, and occasionally to cryptocurrencies, with limited previous exposure to A-shares. After the roadshow, interest in Chinese quantitative firms significantly increased.

Regarding the internal motivations for Chinese private equity firms to pursue globalisation, Minghong Investment explained that although Chinese quantitative firms have performed well domestically, there remains a significant gap compared to leading global institutions in markets such as the U.S. and Europe. These differences include assets under management, multi-market operational experience, and the construction of talent pipelines.

Top global hedge funds maintain superior performance while managing large asset pools by adopting diversified, multi-market, and multi-strategy deployments. In addition to their local markets, they actively engage in Europe, China, Japan, and other key markets. Their investment strategies go beyond equities, encompassing fixed income and global macro approaches, which contribute significantly to diversified returns.

Minghong Investment noted that participating in major global capital markets allows firms to leverage global diversification for return generation, strengthen the influence of Chinese asset managers in the international financial community, and diversify the investor base—all of which support long-term stable growth.

As licensing and talent acquisition progresses, many leading institutions have already entered global operations. Minghong has established offices in Hong Kong and Singapore, with New York as its second research center staffed by over 20 researchers. QuantData has opened a New York office to engage with international investors. Hongxi Fund has segmented its investment research team into units focused on options, machine learning, fundamental quant strategies, commodity index enhancement, and international instruments. On the subjective strategy side, Lakeshore Capital brought in macroeconomist Tao Dong last year to strengthen investment and client service capabilities from a global macroeconomic perspective.

Some institutions have also positioned internationalisation as a key channel for talent recruitment. While overseas strategies may not be directly transplantable to domestic markets, the experience of overseas professionals in methodology, corporate culture, and system architecture is gradually integrating into domestic operations, generating synergistic effects greater than the sum of their parts.

Nonetheless, the globalisation process of domestic private equity firms still faces challenges. Industry insiders note that local firms often lack the ability to localise effectively in international markets and face resource alignment difficulties. Infrastructure deployment for quantitative trading—such as direct trading links and overnight trading capabilities—remains limited, with most firms yet to reach deep levels of overseas market penetration.