Swiss Franc ETF (FXF): Your Complete Guide to Currency Investing

What is the Swiss Franc ETF (FXF)?

The Swiss Franc ETF (NYSE: FXF) is an exchange-traded fund designed to track the price movement of the Swiss Franc (CHF) against the US Dollar. Managed by Rydex Funds, FXF holds actual Swiss Francs in deposit accounts, providing investors direct exposure to CHF/USD exchange rate fluctuations without needing foreign bank accounts or complex forex trading. With over $200 million in assets, it’s the largest ETF focused solely on the Swiss currency.

Why Consider Investing in the Swiss Franc?

Switzerland’s currency has long been considered a “safe haven” asset during global economic uncertainty. Key reasons investors turn to the Swiss Franc include:

• Political Stability: Switzerland’s neutral stance and robust democracy
• Strong Economy: Low unemployment and high GDP per capita
• Inflation Protection: Historically lower inflation than major currencies
• Diversification: Low correlation with stock and bond markets
• Swiss National Bank Policies: Conservative monetary approach with gold reserves

How FXF ETF Works: Mechanics and Structure

FXF operates as a grantor trust, meaning it physically holds Swiss Francs in deposit accounts at UBS in Zurich. When you buy FXF shares, you’re effectively owning a portion of these holdings. The ETF’s value rises when the Swiss Franc appreciates against the US Dollar and falls when it depreciates. Key features include:

• Expense Ratio: 0.40% annually
• Intraday liquidity: Trades like a stock during market hours
• No K-1 tax forms: Treated as a collectible for tax purposes
• Dividends: Pays interest earned on CHF deposits quarterly

Top Benefits of Investing in FXF ETF

FXF offers distinct advantages over traditional currency investments:

• Accessibility: Buy/sell through any brokerage account with no forex minimums
• Transparency: Daily disclosure of currency holdings
• Cost Efficiency: Lower costs than forex futures or options
• Hedging Capability: Protects against USD weakness or eurozone volatility
• No Leverage: Direct 1:1 exposure reduces volatility risk

Key Risks and Considerations

While FXF provides unique opportunities, investors should be aware of these risks:

• Currency Volatility: CHF can swing 5-10% quarterly during crises
• Swiss National Bank Intervention: Past actions have dramatically impacted FX rates
• Negative Interest Rates: Can reduce yield on CHF deposits
• USD Strength: Bullish dollar trends erode FXF value
• Inflation Risk: Unlike bonds, currencies offer no inflation-adjusted returns

Historical example: In 2015, the SNB unexpectedly removed the CHF/EUR cap, causing FXF to surge 15% in one day – illustrating both opportunity and volatility.

How to Add FXF to Your Portfolio

Strategic approaches for different investors:

• Hedgers: Allocate 3-5% to offset European market exposure
• Traders: Use technical analysis for short-term positions during risk-off periods
• Long-Term Holders: Dollar-cost average during USD strength phases
• Retirement Accounts: Hold in IRAs to defer taxes on interest income

Monitor Swiss economic indicators like GDP releases, SNB rate decisions, and the KOF Economic Barometer for timing entries.

FXF vs. Alternatives: How It Compares

Other ways to access the Swiss Franc:

• Forex Trading: Higher leverage but requires specialized accounts
• Swiss Stocks (EWL): Equity exposure with currency side effects
• Gold: Competing safe haven with different drivers
• Multi-Currency ETFs: Like UDN, which includes CHF among other currencies

FXF remains the purest CHF play for most retail investors.

FAQ: Swiss Franc ETF (FXF) Questions Answered

Does FXF pay dividends?

Yes. FXF distributes interest earned on Swiss Franc deposits quarterly, though yields are typically low (0.1-0.5% annually) due to Switzerland’s negative rate environment.

How is FXF taxed?

Gains are taxed as collectibles (max 28% rate). Interest is ordinary income. Non-US investors may have different tax treatment.

Can FXF be used for hedging?

Absolutely. Many investors use FXF to hedge against USD depreciation or European market instability. It typically rises when US stocks decline.

What moves the price of FXF?

Primarily the CHF/USD exchange rate, influenced by: US/Swiss interest rate differentials, global risk sentiment, Swiss economic data, and SNB policy decisions.

Is FXF a good long-term investment?

As a currency holding, FXF doesn’t generate growth like stocks. It’s best suited for diversification and capital preservation during turbulent periods rather than long-term appreciation.

Final Thoughts: Is FXF Right for You?

The Swiss Franc ETF (FXF) offers a straightforward way to gain exposure to one of the world’s most stable currencies. While not a core holding for growth-focused investors, it serves as a valuable tactical tool for portfolio diversification and risk management. Before investing, assess your risk tolerance, time horizon, and how currency exposure aligns with your overall strategy. During times of market stress or dollar weakness, FXF can provide the safe harbor that has made the Swiss Franc legendary among currency traders.