The Foundation was founded in the run up to the first Legislative Council direct elections of 1991 by a group of business people and professionals who endorsed democratic ideals led by Jimmy McGregor and Dr Leong Che-hung.

The HKDF "...has remained consistent in its (economic) philosophy, but beyond such general statements of support for Hong Kong's traditional values, has had little influence over the formulation of policy", said Tony Latter.

The HKDF later lost the last seat in the Legislative Council when Jimmy McGregor stopped contesting the Commercial (First), the Hong Kong General Chamber of Commerce's functional constituency election in September 1995.

Jimmy McGregor was later appointed to Governor Chris Patten's Executive Council in October 1995, but he stayed with the HKDF as a senior member and mentor until his retirement to Canada in 1997.

The HKDF started its full-scale transformation to become a political and public policy think tank when Alan Lung Ka-lun took over as its third chairman from Patrick Shiu Kin-ying in 1997.