GERMAN insurer Allianz is setting up a wholly owned unit in Shanghai to launch hedge funds that invest abroad, three sources said, as some foreign managers prepare for China to ease curbs on overseas investments aimed at stemming capital outflows.

    The unit of Allianz will then apply for a special license that would enable it to raise funds in China directly and invest the proceeds overseas, the sources said.

    Allianz is looking to tap into Chinese investors’ growing demand for overseas assets, which has been accelerated by a weakening yuan. China has so far been heavily restricting capital outflows to relieve pressure on its depreciating currency.

    Europe’s largest insurer is planning to apply for the Qualified Domestic Limited Partnership (QDLP) program license. The license allows foreign managers greater freedom to raise funds within a set quota from domestic high net-worth Chinese investors through a wholly owned fund management firm.

    Licensing for the QDLP program has been informally suspended this year as China tries to stem the capital outflows, but several foreign managers are positioning themselves in the expectation the regulators will grant a new round of QDLP licenses and quotas next year, the sources added.

    A spokeswoman for Allianz, which owns U.S. bond fund manager Pimco and has nearly US$2.2 trillion assets under management globally, confirmed the company is in the process of setting up the wholly owned foreign entity.

    A growing number of foreign financial institutions, including Aberdeen Asset Management, U.S. hedge fund Bridgewater Associates and Vanguard, have recently set up stand-alone money management firms in China as the country further deregulates the fund industry.

    Previously, foreign asset managers looking to distribute investment products in China had to operate through minority-owned joint ventures with domestic firms, but China has been gradually loosening the reins. (SD-Agencies)