The Return You Keep
Heading into 2027, Swiss ultra-high-net-worth individuals face a familiar question: how much of their foreign investment returns will survive conversion into francs, and what will it cost to protect them?
The dollar no longer behaves as reliably as it once did when American financial markets come under pressure. The Swiss franc’s tendency to strengthen during equity sell-offs has traditionally offered some protection against broader market turmoil, although it can deepen losses on unhedged US investments when measured in francs. In April 2025, the dollar weakened alongside US equities during the turmoil that followed President Donald Trump’s tariff announcements, prompting investors to reconsider how much currency exposure they were prepared to leave unhedged.
Periods of stronger US interest-rate expectations and geopolitical tension helped the dollar recover in 2026, although renewed concerns about artificial-intelligence investment and corporate borrowing have since put it under pressure. American equities may produce attractive gains in dollars while delivering smaller returns in francs, and hedging against that risk comes at a cost that depends heavily on the interest-rate difference between Switzerland and the United States.
What Happened To US Investment Returns In Swiss Francs?
The S&P 500 had gained 13.1% since the beginning of 2026 by the close of trading on 15 October, according to Associated Press market figures. That is the index’s price performance in dollars, excluding dividends.
A Swiss investor’s return also depends on what happened to USD/CHF between the purchase date and the valuation date. A rise in American share prices increases the dollar value of the investment; a fall in the dollar against the franc reduces its value when translated into CHF. A stronger dollar works in the opposite direction.
The relationship is straightforward, though the calculation is sometimes misunderstood. Suppose an American equity portfolio rises 12% in dollars while the dollar loses 10% against the franc. The return in CHF is 0.8%, rather than 2%, because the exchange-rate movement applies to the higher value of the investment.
Let us also take an illustrative example of a CHF 10 million investment. A 12% gain would amount to CHF 1.2 million at an unchanged exchange rate. After the assumed currency depreciation, however, the portfolio would be worth CHF 10.08 million, just CHF 80’000 above its starting value. A stronger dollar can also lift the return in francs above the gain recorded by the underlying US market.
Research by Pacer Advisors covering more than five decades of market data shows that international equities have generally performed better than US shares during prolonged periods of dollar weakness, while American stocks have led when the dollar strengthened. Between February 2002 and July 2011, international equities returned approximately 103%, compared with 42% for US shares. The pattern reversed during the dollar’s appreciation from July 2011 to January 2025, when American equities gained nearly 503%, against 117% for developed markets outside North America.
Pacer’s comparison also takes into account differences in company earnings, industry exposure and valuations, rather than simply showing how currency movements affect the same portfolio.
Why Investors Are Reconsidering The Dollar
When President Donald Trump’s tariff announcements unsettled markets in April 2025, American shares, Treasury bonds and the dollar fell together. The Bank for International Settlements (BIS) described how the usual relationship between the currency and risky assets broke down. Its December 2025 review also found that non-US financial institutions continued selling dollars through foreign-exchange swaps and forwards, as investors increased their currency hedges while keeping their American securities.
Research published by the BIS in April 2026 found a marked difference between bond and equity funds. Bond funds generally kept a high and fairly consistent share of their currency exposure hedged, while equity funds adjusted their protection more frequently. Before the market turmoil of April 2025, equity funds with less currency protection attracted more investment and delivered higher returns than those with larger hedges. After the tariff announcements, funds with greater currency protection performed better.
Investors who increased their currency hedges as the dollar weakened protected themselves against further losses, but missed out on some of the gains when it recovered. The Swiss franc also lost ground during parts of 2026, with the Swiss National Bank reporting a decline of around 3% on a trade-weighted basis when it kept its policy rate at 0% in September. The bank linked the depreciation partly to widening interest-rate differences between Switzerland and other major economies.
Investors Can Hedge Dollars Without Selling American Shares
With US interest rates considerably higher than those in Switzerland, the cost of protecting dollar investments against currency movements has become an important consideration for Swiss investors. The Federal Reserve’s target range stood at 3.75–4.00% in September 2026, while the SNB kept its rate at zero. A Swiss investor selling dollars forward against francs therefore faces an exchange rate that largely reflects the difference between short-term interest rates in the two currencies.
When US rates are higher than Swiss rates, dollars generally trade at a discount to the current exchange rate in the forward market. For investors hedging dollar investments into francs, that discount reduces the return they can expect, a difference commonly known as the cost of hedging.
With US policy rates close to 4% and Swiss rates at zero, the approximate annual difference is four percentage points, although actual forward rates depend on market interest rates for the relevant period, the cross-currency basis and transaction costs. If the dollar weakens sufficiently, currency protection may produce a better return in Swiss francs than leaving the investment unhedged. If the dollar strengthens, the unhedged investment may perform better.
Further interest-rate decisions by the Federal Reserve and SNB will affect the rates investors receive when they renew their currency hedges, even if their underlying investments remain unchanged.
Why The Calculation Differs For Equities And Bonds
A US government bond pays interest and repays principal at maturity, but exchange-rate movements can outweigh the income a Swiss investor expects to receive. Even a relatively small move in USD/CHF may erase a year’s interest income when measured in francs.
Hedging reduces this uncertainty, although the forward-rate differential also reduces the advantage of earning higher US interest rates. A Treasury bond offering a substantially higher yield than a comparable Swiss government security will not necessarily deliver the same yield advantage once its dollar exposure has been hedged.
Equity investors face wider fluctuations in share prices and may be more willing to accept currency volatility when holding international portfolios over long periods.
A Swiss investor buying shares in an American multinational owns a business that may earn revenue and incur costs in dozens of currencies. Hedging the dollar value of those shares into francs does not remove the exchange-rate effects on the company’s profits, while its listing currency, reporting currency and sources of earnings may all differ.
What Swiss Investors Need To Decide Before 2027
The currency in which wealth is measured does not necessarily match the currency in which it will eventually be spent. Investment returns reported in Swiss francs may be the priority for some families, while others expect substantial future expenditure in dollars or euros. Hedging foreign investments may make returns more predictable in francs, but it can be less appropriate when the money will eventually be spent in another currency.
A review of foreign investment performance should show what the assets earned, how exchange-rate movements affected those returns in francs and what hedging arrangements added or deducted.
What To Check Before 2027
Measure returns in francs
Compare the performance of foreign investments in their local currency with the return recorded in CHF. Ask your bank or asset manager to show how much currency movements added or deducted during 2026.
Review how much currency exposure remains unhedged
Check whether your portfolio’s exposure to dollars, euros and sterling reflects a deliberate decision. A fund’s trading currency does not necessarily reveal the currencies to which its underlying investments are exposed.
Check the cost of hedging
Ask for the current forward rates, transaction costs and expected effect on returns. With US short-term rates considerably above Swiss rates, hedging dollar investments into francs changes the return calculation.
Treat equities and bonds separately
Foreign bonds often benefit from more predictable returns in the investor’s home currency. For equities, hedging may reduce currency fluctuations but can also remove gains when the foreign currency strengthens.
Review the policy before rates change
The Federal Reserve and Swiss National Bank may alter the economics of currency hedging in 2027. Check when existing contracts expire and what renewing them at current market rates would mean for returns.
Match the currency to the purpose of the investment
A family measuring its wealth in CHF may still have future spending commitments in dollars or euros. Investments intended to cover those expenses need not follow the same currency policy as assets held for long-term growth in francs.
References
1. Shin, H. S., Wooldridge, P., & Xia, D. (2025, June 20). US dollar’s slide in April 2025: The role of FX hedging (BIS Bulletin No. 105). Bank for International Settlements. https://www.bis.org/publ/bisbull105.pdf
2. Huang, W., Krohn, I., & Sushko, V. (2025, December 8). Global FX markets when hedging takes centre stage. BIS Quarterly Review. Bank for International Settlements. https://www.bis.org/publications/global-fx-markets-when-hedging-takes-centre-stage
3. Lindoso, I., Schrimpf, A., Sushko, V., & Tomov, T. (2026, April 22). Investment funds’ de facto currency risk exposure (BIS Bulletin No. 123). Bank for International Settlements. https://www.bis.org/publ/bisbull123.pdf
4. Swiss National Bank. (2026, September 24). Monetary policy assessment of 24 September 2026. https://www.snb.ch/en/publications/communication/press-releases-restricted/pre_20260924
5. Board of Governors of the Federal Reserve System. (2026). Open market operations: Federal funds target rate history. https://www.federalreserve.gov/monetarypolicy/openmarket.htm
6. Penke, M. (2026, February 4). Was bedeutet der schwache Dollar für US-Aktien? Handelsblatt. https://www.handelsblatt.com/finanzen/anlagestrategie/geldanlage-was-bedeutet-die-dollar-schwaeche-fuer-us-aktien-01/100146084.html
7. Mannweiler, A., Reccius, S., & Exuzidis, L. (2026, January 28). US-Aktien und Gold auf Rekordkurs, Dollar in der Krise. Handelsblatt. https://www.handelsblatt.com/finanzen/maerkte/devisen-rohstoffe/usa-us-aktien-und-gold-auf-rekordkurs-dollar-in-der-krise/100195372.html
8. Blume, J. (2026, July 15). Der Dollar wird über die Zeit gegenüber anderen Währungen abwerten. Handelsblatt. https://www.handelsblatt.com/finanzen/anlagestrategie/geldanlage-der-dollar-wird-ueber-die-zeit-gegenueber-anderen-waehrungen-abwerten/100238839.html
9. Associated Press. (2026, October 15). How major US stock indexes fared Thursday 10/15/2026. https://apnews.com/article/f0a4f8aa60a6a24237c419aba38f31fd
10. Reuters. (2026, October 16). Dollar heads for weekly fall as investors gauge AI selloff impact. https://www.reuters.com/world/asia-pacific/euro-gets-much-needed-reprieve-ai-wobbles-rock-dollar-2026-10-16/
