The Swiss franc is once again confirming its status as a major reserve currency, one that is particularly significant at a time when instability in the Middle East is causing major turbulence in global geopolitics. However, the franc’s secular strength has a downside.

In an environment of low interest rates and a normalised Swiss monetary policy, that strength requires bold, diversified asset management in order to enhance returns.

While the franc’s status is helping to keep Swiss interest rates close to zero, it is precisely during periods of geopolitical tension that its true nature is revealed: a strong currency whose steady appreciation acts as a substitute for yield. That appreciation is far from a one-off: it forms part of a trend that has lasted for more than 25 years. It confirms the Swiss franc’s role as a long-term store of value, but also as a currency offering a safe haven for any international investor who wants to protect their capital.

There is a logical parallel to be drawn with gold. At a time when geopolitical risks are intensifying and when uncertainty has again become a constant in the markets, gold – like the Swiss franc – is confirming its role as a natural hedge against the volatility of risk assets.

Over the decades, gold and the Swiss franc have become two key facets of strategies intended to preserve capital over periods that transcend economic cycles and shifts in monetary policy.

Over the decades, gold and the Swiss franc have become two key facets of strategies intended to preserve capital over periods that transcend economic cycles and shifts in monetary policy.

Like the US dollar and gold, then, the Swiss franc has established itself as a reserve asset. While the franc is supported by fundamentals such as the solidity of the Swiss economy and the credibility of Swiss institutions, the dollar owes its pre-eminence to positive US interest rates and the might of the US economy, which continues to attract international capital flows.

Given the lack of yield offered by the Swiss franc, managing a portfolio denominated in that currency must now involve more assertive diversification, which requires investors to accept more risk. Swiss franc-based investors can no longer ignore this reality, and it begs the question of how to reconcile the uptrend in the Swiss franc with the potential of dollar-denominated assets.

The answer lies in targeted diversification coupled with a solid Swiss base. On the one hand, the approach may include exposure to tech stocks combined with currency hedging, giving investors exposure to the United States’ economic might.

On the other, a renewed focus on Swiss companies offering high dividend yields of 4-5% may be beneficial in two ways: these stocks allow investors to counteract the low returns available from traditional Swiss-franc bond positions, while not exposing them to currency risk, which is a key advantage for any franc-based portfolio. The Swiss stock market contains high-quality stocks with solid balance sheets and good dividend track records, providing a stable and predictable source of yield.

Swiss real-estate funds are another credible alternative to bonds, since the appeal of traditional fixed-income investments is limited by the low yields that have been on offer for a long time now.

Gold – if hedged against dollar risk – is currently in an unusual situation. It has been a key diversification tool for decades, but it has now taken on a new stature because it is no longer just a source of protection. The gold price is being supported by persistent demand from central banks and institutional investors, and so is also playing the role of an active performance driver.

On the topic of reserve assets, it is worth considering dedollarisation, which has been a recurring theme of geopolitical discussions. Although the dollar’s decline is a regular subject of debate in the financial press, the fundamentals point to the opposite trend. The US dollar index, measuring the dollar against a basket of foreign currencies, is not showing any sign of structural weakness that could lend credibility to the idea of a continuing decline in the dollar.

In conclusion, the Swiss franc continues to offer a resilient base, capable of withstanding a very wide range of market configurations and establishing itself as an essential part of any long-term asset allocation. As regards converting the Swiss franc’s unique characteristics into long-term returns, it is now up to the Swiss financial centre to come up with suitable instruments, whether they be hedging vehicles, structured products or innovative asset allocation solutions.

The opinions expressed herein are correct as at 16 March 2026 and are subject to change without notice. This information should not be relied upon by the reader as research or investment advice regarding any particular fund, strategy or security. Past performance is not a guide to current or future results. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.