Fund the Pictet Funds Euro Thesis

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However, such successes have been limited over the life of the fund. Examining the manager's comments and the comments in the annual report, it appears as though fund management is generally reactive to trends rather than proactive. The discussion centers on what happen in the economy and to the fund, rather than any discussion on what the fund is going to do to exploit opportunities.

The fund's heavy concentration in the French market has left it particularly vulnerable to shocks emanating from that market. For example, in the first quarter of 2007, the inflation index in France moved sharply lower, which was not anticipated by the fund managers. In the second quarter, the risk of a hike in VAT increased the volatility of French securities, in particular the short-range maturities. The result of this high level of exposure to the French market was that the fund suffered over this period as a result of these shocks. The lack of diversification in the fund should be viewed as a concern in light of management's inability to generate profit from their strong position in the French fixed-income market.

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It should be remembered that this is a new fund. It bears more than the Barclays' Index on account of its exposure to Italy and Greece, and is therefore riskier. The indexed performance chart shows that the returns have slightly more volatility than those of the market. The problem is that the market has been very poor since the inception of the fund. The fund, however, has probably declined more in that time period than it should have based on its risk level. This can be attributed to its high level of exposure to a volatile French market. There have been, however, few examples of superior performance.

The Pictet Funds Euro Inflation-Linked Bonds Fund has, as yet, failed to achieve its stated objectives. However, it is early in the fund's life, and the Index has also performed poorly over this short time period. Therefore, it is unreasonable to render a final verdict on the performance, and by extension the strategy and composition, of this fund.

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