How to Invest in Swiss Francs When Interest Rates Are at 0%

Investing in or borrowing Swiss francs (CHF) in a 0% interest rate environment can seem boring at first glance. From our perspective, however, CHF strategies are not always about generating yield. Instead, they are typically evaluated for their role in currency stability, balance-sheet protection, and long-term resilience. Historical experience, including a prolonged period of negative interest rates, has reinforced the strategic function of the Swiss franc rather than diminished it. That said, there are also many Swiss equities with attractive returns.

Why is the Swiss franc valued for stability rather than yield in global portfolios?

The Swiss franc has long been regarded as a defensive currency, valued primarily for stability rather than income generation. Even when interest rates are at or near zero, CHF exposure can help reduce overall portfolio volatility and act as a counterweight during periods of geopolitical or market stress.

For internationally diversified investors, CHF-denominated assets, often with attractive returns, function as an anchor, offsetting higher-growth or higher-risk allocations elsewhere in the portfolio. In this context, the absence of high yield is not a drawback but a characteristic of a currency designed to preserve value across economic and market cycles.

How did periods of negative interest rates influence CHF strategies?

Switzerland has already experienced an extended phase of negative interest rates, driven largely by strong capital inflows and sustained safe-haven demand. During this period, investors effectively accepted a cost in exchange for stability.

Rather than eliminating CHF-based strategies, negative rates clarified their purpose. Borrowers benefited from exceptionally low financing costs, while investors increasingly assessed CHF exposure through a risk-adjusted and balance-sheet-oriented lens rather than a traditional income-focused framework. As we see it, these conditions reshaped how sophisticated investors evaluate the true cost, and value, of financial safety.

How can borrowing in Swiss francs enhance strategic flexibility amid renewed interest in carry strategies?

Borrowing in Swiss francs has long been associated with comparatively low and relatively stable financing costs, making CHF a potentially attractive funding currency for disciplined balance-sheet management. In practice, this can mean borrowing in CHF at very low rates—often below 1% when including the bank’s margin—and allocating the proceeds to higher-yielding investments such as high-dividend-paying equities, preferred shares, or similarly income-oriented assets. When structured prudently, investors seek to capture the incremental return between low funding costs and higher portfolio income.

The effectiveness of this approach depends less on the headline yield differential and more on discipline. Leverage must remain measured, liquidity buffers should be robust, and asset selection should emphasize durability of cash flows rather than yield alone. Over extended periods, the stability-oriented monetary framework of the Swiss National Bank has contributed to the perception of Swiss-franc funding conditions as comparatively predictable across market cycles.

Against this backdrop, interest in carry-trading strategies is gaining momentum. A carry trade involves borrowing in a low-interest-rate currency such as the Swiss franc and deploying the capital into higher-yielding assets to earn the interest-rate spread, or “carry.” While this dynamic may enhance returns in supportive environments, it also introduces currency, market, and liquidity risks, making careful structuring, diversification, and ongoing risk management essential.

Can investing in CHF make sense in a 0% interest rate environment?

While fixed-income investments are often associated with income predictability, CHF exposure is not limited to low- or zero-yield instruments. Some Swiss-listed equities denominated in CHF distribute dividends that can be a mid-single-digit. These may be considered as part of a broader portfolio, rather than as direct substitutes for fixed income.

Beyond equities, CHF exposure can be accessed through a variety of instruments, including options and structured products, each with distinct risk characteristics and suitability considerations. As with any currency-denominated approach, CHF strategies are typically assessed in relation to overall portfolio objectives, diversification goals, and risk tolerance.

How should CHF strategies be integrated into global wealth planning?

Swiss-franc strategies are often most effective when embedded within a broader international wealth-planning framework. They can complement growth-oriented assets, support liquidity management, and align with future liabilities.

Whether interest rates are negative, zero, or modestly positive, CHF borrowing and investing tend to function best as long-term structural elements rather than short-term tactical trades. Early integration preserves flexibility, while reactive implementation often limits available options.

Questions & Answers

Summary

Swiss-franc strategies have demonstrated their relevance across both zero and negative interest rate environments. Their primary value lies not in income generation, but in stability, predictability, and balance-sheet strength. When incorporated early into international wealth planning, CHF borrowing and investing can quietly contribute to portfolio resilience in an uncertain global landscape.

About the Author

This article reflects the perspective of Alpen, a Swiss-based wealth-planning professional advising internationally minded clients on retirement domicile selection, residency planning, and cross-border wealth structuring in addition to traditional wealth management services.