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.
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.”