Pictet Funds, the fund distribution company of Swiss bank Pictet & Cie, is launching a UCITs III-compliant long/short European equity fund based on an existing hedge fund strategy.

The PTF(LUX)-Corto Europe fund will employ the same strategy as the Cayman-domiciled Corto European Fund. 

Pictet senior portfolio analysts Nils Francke and Philippe Sarreau, along with equity analyst David Dufour, will manage the new Luxembourg-domiciled fund.

Pictet is joining a growing list of firms rolling out UCITS III funds with an absolute return strategy, seen as a kind of "hedge fund lite" product with relatively high standards of disclosure and liquidity.

The team will use a stock-picking approach, based on fundamental research to identify changes at the company level which will trigger long term appreciation in the stock price, according to the firm.

The fund has a mid cap bias (it will be "clearly over-represented" in companies with a market cap value under $5 billion).

On the investment environment, Sarreau said:  “In the aftermath of the credit crisis, and with the Greek crisis as a catalyst, the bull market in the smaller EU nations has come to a halt. Instead, growth and profitability are moving to the centre and north of Europe, where companies will benefit from the global recovery and a weaker euro.”

The PTF(LUX)-Corto Europe fund will be registered in major European countries during 2010; it will initially be available to institutional and private investors in euro, and hedged US dollar and Swiss franc denominated share classes.