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

What is the Swiss Franc ETF (FXF)?

The CurrencyShares Swiss Franc Trust (NYSE: FXF) is an exchange-traded fund designed to track the price of the Swiss franc (CHF) relative to the US dollar. Created in 2006, FXF holds physical Swiss francs in deposit accounts, providing investors direct exposure to CHF movements without needing foreign bank accounts or complex forex trading. Each FXF share represents approximately 100 Swiss francs, making it a transparent and accessible tool for currency diversification.

Why Consider Investing in the Swiss Franc?

The Swiss franc has long been regarded as a “safe-haven” currency during global economic turbulence. Key reasons investors turn to CHF include:

• Stability: Switzerland’s low inflation, strong rule of law, and political neutrality historically preserve CHF value.
• Diversification: Reduces portfolio reliance on USD or EUR, especially during market volatility.
• Hedging: Protects against USD depreciation or Eurozone instability.
• Swiss National Bank Policies: The SNB’s conservative approach limits aggressive currency devaluation.

How FXF Works: Mechanics and Structure

FXF operates as a grantor trust, holding actual Swiss francs in J.P. Morgan Chase Bank accounts. Key features include:

• Direct Currency Holding: Unlike synthetic ETFs, FXF owns physical CHF, minimizing counterparty risk.
• Price Tracking: NAV reflects live CHF/USD exchange rates, with minor deviations due to expenses (0.40% annual fee).
• Liquidity: Trades on NYSE Arca like a stock during market hours with tight spreads.
• Dividends: Earns interest on deposited francs, distributed monthly to shareholders.

Top Benefits of Investing in FXF

• Simplicity: Buy/sell through any brokerage account—no forex platform needed.
• Cost Efficiency: Lower expenses than forex trading commissions or futures contracts.
• Transparency: Daily disclosure of CHF holdings and NAV.
• Inflation Hedge: CHF’s stability combats purchasing power erosion in weaker currencies.

Key Risks to Evaluate Before Investing

While FXF offers advantages, consider these challenges:

• Currency Volatility: CHF can fluctuate sharply during SNB interventions or global risk events.
• US Dollar Strength: Rising USD diminishes FXF’s value, as it’s priced in dollars.
• Interest Rate Differentials: Higher US rates may make CHF less attractive.
• Swiss National Bank Actions: Past interventions to cap CHF appreciation show policy unpredictability.
• Inflation Risk: Though rare, Swiss inflation could erode real returns.

How to Add FXF to Your Portfolio

Follow these steps to invest:

1. Open a brokerage account supporting ETF trading (e.g., Fidelity, Schwab).
2. Research timing using macroeconomic analysis (e.g., USD trends, SNB meetings).
3. Determine allocation size—typically 5-10% for currency diversification.
4. Place trade orders (market, limit, etc.) using ticker “FXF”.
5. Monitor positions quarterly, adjusting for major currency regime shifts.

Frequently Asked Questions (FAQ)

Is FXF a good hedge against stock market crashes?

Historically, yes. During crises like 2008 or 2020, investors flocked to CHF, boosting FXF. However, correlations can shift—combine with gold or Treasuries for robust hedging.

Does FXF pay dividends?

Yes. Interest earned on deposited francs is distributed monthly. Yields vary with Swiss interest rates (e.g., ~0.75% annually as of 2023).

How does FXF differ from forex trading?

FXF eliminates leverage risks and margin calls inherent in forex. It also avoids the need for overnight rollover fees, making it simpler for long-term holders.

What impacts the Swiss franc’s value most?

Key drivers include SNB policy, Swiss economic data (GDP, inflation), global risk sentiment, and EUR/CHF dynamics due to Switzerland’s trade ties with the EU.

Can I hold FXF in a retirement account?

Absolutely. FXF is IRA- and 401(k)-eligible, offering tax-advantaged exposure to CHF. Consult a tax advisor for specifics.

Are there alternatives to FXF?

Competitors include ETC Group’s SFRC (EUR-denominated) or forex futures. For Swiss equity exposure, consider equity ETFs like EWL. FXF remains the purest CHF play.

Final Thoughts: FXF delivers efficient, accessible Swiss franc exposure ideal for hedging or diversification. While not risk-free, its unique structure and Switzerland’s economic resilience make it a strategic tool for sophisticated portfolios. Always align investments with your risk tolerance and consult financial advisors before trading.