At Allianz Global Investors, fund managers are starting to talk up the beginning of an age of "the New Normal", in which global markets will be shaped by four key trends: global growth will be led by emerging economies, and investors around the world will see the re-emergence of inflation, restrained economic growth and more frequent market shocks.

Against the backdrop of these market forces, Allianz GI says only one thing will go up in times of crisis -- correlation -- and that the traditional method of asset divlaersification has become less meaningful. Investors should more actively reinforce core investments, re-allocate portfolio positions and respond to opportunities produced by short-term market dislocations and long-term fundamental change. And the fund house will gradually reshape its product line with that in mind.

To that end, Allianz GI is launching its new Allianz RCM Greater China Dynamic fund in Hong Kong. The asset raising effort for the new fund is already underway, and the initial public offering period will last until September 30.

Lawrence Tse, chief marketing officer at Allianz GI in Hong Kong, says the new fund will become the firm's core product offering for the Greater China region, while other previously issued products will be repositioned as satellite strategies for investors interested in China, Hong Kong and Taiwan. The new fund will later be offered to European and Singaporean investors.

Compared to RCM's previous Greater China and Hong Kong equity offerings, the new fund will have a heavier tilt towards stock picking and will include a greater allocation to Taiwan. The portfolio allocation to small- and mid-cap stocks will be about 20%.

Seeking to fit with changing investor appetite on fee structures and demand for greater flexibility away from fully invested portfolios, the new fund will be managed using RCM's "dynamic strategy".

This means that, unlike portfolios following 130/30 or absolute-return strategies, the fund can have less than 100% net equity exposure through index futures. There will be no leverage in this fund; index futures will employ cash financing. A flat annual management fee of 1.75% is in place, with no variable performance fees. Cash holding in the fund can rise to 30% in volatile markets.

Otherwise, aside from its fee schedule and use of index futures, the fund will be marketed along the same lines as other Greater China funds. The fund managers see its investments underpinned by key themes, which include strong prospects for growth in the Greater China region and for renminbi appreciation, and reasonable market valuations.

The RCM Greater China Dynamic fund has the capacity to manage up to $1 billion in Greater China equities benchmarked to the MSCI Golden Dragon Total Return index. The Hong Kong-based fund management team includes portfolio manager Pan Yu Ming and head of risk strategy and derivatives George Liu.

Pan and Liu stress they will employ RCM's bottom-up stock-picking process and the flexibility to deviate from the benchmark by as much as 20%. However, in its preliminary portfolio modelling, about 57% of the fund will be allocated to China, 16% to Hong Kong and 25% to Taiwan stocks. A-shares, accessed through p-notes, will account for about 10% of the allocation, while cash holding will be around 3%.

Pan started his career at Allianz GI as an analyst covering Thai equities and energy utilities in 1999, moving onto global equities and Asia-Pacific balanced portfolios between 2002 and 2004. From 2004 to 2006, he was a lead manager for the firm's Singapore country, Asian and local balanced and emerging Asia funds.

From 2006 onwards, he focused more on China and lead-managed RCM's Greater China, Singaporean and Malaysian equity mandates, while sub-advising RCM's Greater China equity portfolios that were marketed to third-party European retail investors. From 2008, he has co-managed RCM Little Dragons Fund, a portfolio focusing on Asia ex-Japan small and mid-cap stocks.

Liu, RCM's quant head, has 13 years of experience in risk management and quantitative analysis. Before joining RCM, he worked for local hedge boutiques including Vision and Winning Investment Management. He has also been a senior consultant at MSCI Barra, advising prop desks and hedge funds on Barra's suite of index arbitrage, long-short optimisation and hedging strategies.

At the end of 2008, Allianz GI was the world's largest active asset manager, with total assets of $1.28 trillion. RCM is one of the six investment subsidiaries owned by the group.