Macau’s new Investment Funds Law – part one: private funds

As Macau modernises its financial sector, foundational finance-related legal frameworks have undergone significant yet understated reforms. While the changes appear minor at first glance, they hold transformative potential. A prime example is the unequivocal introduction of private funds.

For nearly 25 years, Macau’s fund regulatory framework (rooted in Decree-Law 83/99/M) recognised only public investment funds. The incoming Law 11/2025 (the Investment Funds Law), effective January 1 2026, fundamentally transforms this landscape by introducing the first comprehensive private fund regime in Macau’s regulatory history. This development positions Macau as an emerging destination for institutional-grade wealth management and alternative asset strategies across the Greater Bay Area.

Under the Investment Funds Law, private funds are investment funds that do not conduct public offerings but instead raise capital through private placements directed exclusively to investors that meet specific qualification criteria. Unlike the prior legal framework, which lacked any formal structure for private funds, the Investment Funds Law grants private funds full legal recognition with dedicated operational flexibility.

The key distinction lies in the approval pathway: whereas public funds require prior authorisation from the Monetary Authority of Macau (AMCM), private funds are subject to a communication regime, under which the fund manager must notify the AMCM at least 15 business days before the intended offering, enclosing the relevant fund and management information.

If the AMCM raises no objection within that period, the fund may proceed to market for eligible investors, striking a balance between regulatory oversight and market efficiency by facilitating faster capital deployment while preserving baseline governance standards.

The Investment Funds Law grants private fund sponsors new structuring options unavailable under the previous framework. In accordance with Section 4, private funds may adopt any of three legal forms:

• Contractual funds;

• Investment companies; or

• Limited partnerships.

Public funds, by contrast, are restricted to contractual funds or investment company structures.

The inclusion of limited partnerships brings Macau into closer alignment with international market practice, particularly in the private equity and venture capital space. This expanded menu of legal forms allows sponsors to better calibrate liability allocation, governance design, and capital commitment mechanics (which are often seen as critical considerations for alternative asset managers operating investment platforms or direct investment vehicles).

Private funds also benefit from freedom from minimum investor count or capital subscription thresholds, and may adopt sophisticated structures, including umbrella funds with subfunds, master–feeder arrangements, and funds-of-funds. Each structure provides distinct tax and operational advantages in the context of Macau’s source-based taxation regime.

Although private funds benefit from a less stringent supervisory regime, they remain anchored in robust governance and compliance standards. Fund managers must meet stringent qualification requirements, including a minimum of three years’ experience in regulated financial institutions. The Investment Funds Law also imposes clear obligations designed to safeguard investor confidence and market integrity, including:

• Rigorous investor qualification procedures, aligned with AMCM guidance on thresholds for qualified investors;

• Annual audited financial statements, ensuring transparency and accountability;

• Strict operational segregation of assets, protecting client holdings from commingling risks;

• Manager–custodian separation rules and oversight of subcontracting arrangements; and

• The AMCM’s retained inspection and intervention powers to reinforce supervisory authority.

Importantly, private funds are expressly prohibited from public advertising or general solicitation, highlighting their exclusive focus on qualified investors. This framework balances structural flexibility for sponsors with disciplined safeguards, assuring clients of a secure, well-regulated investment environment.

The new private fund regime opens clear strategic opportunities for cross-border wealth management across the Greater Bay Area. The 2024 expansion of the Cross-Boundary Wealth Management Connect Scheme raised the individual investor limit to RMB 3 million, widening access to eligible products and expanding the pool of regionally channelled capital. The Investment Funds Law positions Macau-domiciled private funds as viable, professionally managed vehicles for institutional investors and high-net-worth individuals seeking alternative Greater Bay Area capital flow channels, combining structuring flexibility with enhanced regulatory clarity.

Designated as a service economy under China’s 14th Five-Year Plan and positioned as the Portuguese-language gateway for capital from Portuguese-speaking countries, Macau is strategically well placed to attract fund domiciliation. The government’s “1+4” strategy (centring integrated tourism and leisure as the core pillar while prioritising traditional Chinese medicine and big-health, modern financial services, high technology, and conventions, exhibitions, trade, culture, and sports) reinforces this appeal by concentrating specialised services and deepening regional connectivity.

The Investment Funds Law’s timing aligns with Macau’s new Tax Code, also effective January 1 2026, which removes capital gains tax and stamp duty on fund units. Together, these policy, market-access, and tax measures create a powerful dual incentive for sponsors and investors to consider Macau as a fund domicile.

In a nutshell, the Investment Funds Law represents a watershed moment in Macau’s financial services evolution. By formally regulating private funds with operational flexibility while maintaining prudential safeguards, the law signals Macau’s commitment to developing a competitive, internationally aligned fund ecosystem.