The surprisingly weak Swiss franc

Why could be an expensive error. For example,

Covering exchange risk. Moreover, especially against the US dollar, is a well -established habit for many Swiss investors. For example, The logic is simple: the Swiss franc (CHF) has long been considered a refuge currency. Consequently, recognized for its strength and stability. For example, But in the past 15 years, this strategy has discreetly turned against them.

The turning point since 2008

For decades, the Swiss franc regularly appreciated against the dollar. However, But after the 2008 financial crisis. Meanwhile, the Swiss National Bank (BNS) began to intervene in the foreign exchange markets to avoid an overly rapid appreciation of the franc – in order to support the competitiveness of Swiss exports. In addition to these direct interventions. Moreover, Switzerland introduced highly negative interest rates, surprisingly weak swiss franc which remained in force from 2015 until recently – and could return following the BNS decision last Thursday.

Consequently. Therefore, the trajectory of the franc has stabilized. Furthermore, It has oscillated between 1.0 and 1.2 USD per CHF for more than a decade. Therefore, not under the effect of market forces, but due to active monetary policy. For example, In parallel. Furthermore, the American federal reserve has maintained significantly higher interest rates than those of the BNS, creating a persistent yield gap between the assets denominated in USD and those in CHF.

The hidden cost of the cover

Many Swiss investors have covered their investments in USD, thinking of avoiding volatility. In addition, But the data tells another story. Consequently, By comparing the same investment – an ETF Global Actions (Ishares MSCI World) – between December 2012. In addition, May 2025 (the longest surprisingly weak swiss franc period for which we have data for the three ETF), the results are as follows:

• The USD version generated a yield of +268.45%
• This same investment in USD, converted to CHF, generated +226.74%
• The covered version in CHF only generated +200.00%

In summary: the coverage has not protected yields.. She reduced them.

For what? Because coverage is generally done using term contracts that integrate the interest rate differential between currencies. As the USD rates are higher, the term rate is unfavorable for Swiss investors. In practice, the higher efficiency of the dollar is transferred to the counterpart of coverage. In the long term, this results in significantly lower yields – in particular for long -term investments.

When the cover can still make sense

Not all assets react in the same way. For actions, which are volatile and linked to growth, coverage surprisingly weak swiss franc often generates an additional cost and reduces diversification. For income -generating investments such as private credit, coverage may be useful if income must cover expenses in CHF. But even in this case. the profit must be balanced with the permanent cost of coverage and the performance bonus of assets in USD.

Rethink the “prudent” option

USD exchange risk coverage in CHF may seem to be the safest option – but over the past decade. this has often been done at the expense of yields. With lasting interest rate differentials in favor of the dollar. and a Swiss franc which is no longer appreciated structurally, long -term coverage can erode the performance of a portfolio.

Even for prudent Swiss investors in the face of exchange risk. being limited to the instruments denominated in francs can be counterproductive. The local bond market is relatively limited and concentrated, which limits diversification. A surprisingly weak swiss franc more wise strategy is to build a global bond portfolio and to cover selectively, as needed.

At Petiole Asset Management AG. we are specialized in the construction of generally diversified portfolios in private equity, private credit, real estate and infrastructure. With more than 20 years of experience. approved by Finma, we offer access to exclusive co-investments and flagship funds generally reserved for institutional investors. Our team works in close collaboration with each customer to design tailor -made investment programs. aligned with their long -term objectives and their risk appetite.

If you want to enrich your portfolio with a global exposure to private markets – without compromise on transparency. quality or access – contact Petiole today to exchange with one of our advisers.

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