Macau’s new Investment Funds Law – part two: key entities and conflicts of interest

While introducing the legal framework for the incorporation of private funds in Macau, the Investment Funds Law (Law 11/2025) also updated the roles played by the sector’s key actors, allowing for an unprecedented level of integrity and cross-border potential. We refer to the investor, the fund manager, the custodian, and the marketing entity, who must all act with prudence, honesty, diligence, and independence, always in the best interests of the investors.

Although occupying distinct positions, their responsibilities have been sharpened to balance innovation in tandem with a simple premise: investors provide the capital but do not manage the fund.

The Investment Funds Law provides that investors hold an economic interest but do not participate in day-to-day management. They enjoy rights to share in profits, transfer or redeem units, and claim remaining assets upon liquidation, along with the ability to call meetings, exercise voting rights, and pursue legal action against entities infringing their interests.

By contrast, the party responsible for the central operational role of administering the investment is known as the fund manager. They drive investment decisions, execute trades, and oversee administration, thus bearing broad liability for valuation errors, misleading disclosures, and lapses in monitoring delegated tasks. For this reason, only Macau-authorised financial entities may administer funds, and they must maintain robust corporate governance, internal controls, risk management systems, human and technological resources, and financial strength.

The custodian must be a credit or financial institution authorised to provide custody services. They are responsible not only for safekeeping of the fund’s assets and maintaining accurate records but also for ensuring compliance with both the law and the fund’s constitutive documents, while bearing the liability for any loss of assets as well as damage arising from breaches of its legal or contractual duties.

Finally, the law also addresses the role of marketing entities – whose relationship with the fund manager has been explicitly structured – which are entrusted with promoting fund units in the market in accordance with the fund’s constitutive documents and applicable legal requirements, and in a manner that avoids misleading investors.

The new law significantly expands outsourcing flexibility for fund managers, custodians, and marketing entities, building on prior sub-delegation concepts but with enhanced clarity.

In particular, the fund manager may delegate duties to external fund management entities recognised by the Monetary Authority of Macau (AMCM) to carry out investment management functions on its behalf, while remaining fully liable. In this context, the law is even more open to non-Macau institutions, as they may also act as custodian if they meet the applicable regulatory standards. As with the fund manager, the law also allows the custodian to subcontract certain functions to external institutions recognised by the AMCM, without relieving it from its responsibility.

The framework goes a step further by allowing the redomiciliation of foreign funds to Macau. This key innovation in the Investment Funds Law enables them to transfer their legal seat without disrupting operations, preserving the fund’s rights, obligations status, or financial records – all while being considered a tax-neutral process.

As previously mentioned, the fund manager determines the fund’s investment policy, while the custodian oversees the assets and verifies that operations comply with the law and the fund’s constitutive documents.

This functional difference may give rise to conflicts of interest, which is why it is explicitly addressed by the Investment Funds Law: the fund manager and the custodian cannot be the same entity (nor subsidiaries of one another unless effective internal controls are in place), and persons in management or supervisory roles in one cannot perform conflicting functions in the other, unless disclosed and authorised. Additionally, their relationship must be set out in a written contract, defining rights and obligations, information-sharing mechanisms, and principles for resolving conflicts, further preventing any conflicts, and thus ensuring the protection of the investors’ interests.