UK fund investors are exposed to the tune of £4bn to plunging Swiss stocks, but they need not worry. They have made money from the slide anyway, due to an appreciation of the Swiss franc, according to Hargreaves Lansdown.
The Swiss stockmarket fell around 10% this morning as the Swiss franc rocketed against the pound, euro and dollar. The hefty retreat followed the Swiss central bank dropping its peg against the euro.
Laith Khalaf, senior analyst at Hargreaves, says UK fund investors' exposure to Swiss stocks is mainly via European funds, but also perhaps more surprisingly via UK equity income funds.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
He notes that Roche and Novartis, both Swiss stocks, are popular fund holdings with managers in the UK equity income sector, who can invest up to 20% of their portfolio overseas. For instance, Woodford Equity income has 3% invested in Swiss pharmaceutical giant, Roche.
Hargreaves estimate the average European fund has 9% invested in Swiss stocks, the typical European (ex-UK) tracker fund has around 20%, and the average UK equity income fund has just under 1%, though some UK Equity Income funds have closer to 5% invested.
"So far, even though the Swiss stock market has tanked, the effect of a rising Swiss franc has more than offset that fall. After factoring in the currency's rise against sterling, UK investors would on average have made around 2% on their Swiss stock market holdings this morning.
"UK Equity Income funds invested in Roche and Novartis would have made more, both these stocks rose about 5% in Sterling terms. Not bad for a morning's work.
He stresses, though, that as the market is still open, these numbers could change.
Khalaf adds: "European investors will now be keenly watching whether the ECB turn the money printing taps on next week, and considering what effect this will have on the single currency, and on stock markets across Europe."
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
What is the 25% pension tax-free cash - and when should you take it?The 25% tax-free cash that savers can take from their pension pots got plenty of airtime in the run-up to the Autumn Budget, with speculation that it could be cut or axed. But, what is it and how does it work?
