Beyond general information of the Funds, the portfolio reports offer a strategic overview on the latest performance.

The last few weeks have seen an increasing number of reports and opinions variously published and aired stating that the “crisis” has come to an end – that we can already see the light at the end of the tunnel. Although it might well be too early for such proclamations, it does seem likely that the period of the financial crisis that saw banks and countries threatened with bankcruptcy is indeed nearing the end. At the peak (or should we say low-point?) of the wave of credit expansion that swept the entire developed world over the past decades, two years ago the financial crisis arrived, leading, in the recent period, to capital-market panic and to a deepening economic downturn, and to all the attendant effects evident to every one of us. During the course of last year, the financial crisis, widely dubbed the “subprime crisis”, worsened into a credit crisis as a result of enormous bank write-downs which weighed heavily on the economy in the form of a reluctance of the banks to lend to each other, an increase in the costs of funding, and a narrowing of the credit market.

The last six to eight weeks have seen a favourable turn in the equity markets, causing some relief for the holders of risky assets: by mid-May the majority of the international stock indexes had made up the losses of the first quarter. Could this be the start of a sustained recovery? Are we in the early stage of a bull market, or is it just a “bear-market rally” – a temporary correction in an otherwise falling market?

Carry trade, one of the popular investment strategies of the past decade, suddenly lost its significance in the financial crisis that began to unfold in mid-2007. The weakening of the dollar seen over the past month and the simultaneous strengthening of the emerging markets raises the question: could carry trade be on its way back?

Carry trade is nothing other than a short position in the financing currency (dollar, yen, or Swiss franc, though more recently the Czech koruna has also been classified as such), and a long position in a high-interest-rate emerging market currency such as the forint. Three factors must be in place for this to work: 1) a low-yield envi-ronment on the developed markets which encourages investors to take risks in regions outside the developed markets, while providing a cheap source of funds for investment; 2) a positive interest margin, which makes it worth buying and holding the emerging market currency even if it is not appreciating against the financing cur-rency such as the dollar (this is what the term “carry” refers to); and 3) the volatility of the carry currency needs to be low, so that the exchange rate risk will be offset by the interest differential. As the trend of a weakening dollar clearly increases the attraction of a carry position, we can also assume there is a partial causal relationship between the two phenomena.

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