The Swiss Safe Haven ETF Portfolio

The world is at war. As I am writing this, the U.S. and Israel-backed campaign in Iran has entered its fifth week. The Strait of Hormuz remains effectively locked down. There have been over a dozen U.S. casualties, including the loss of multiple fighter and transport aircraft.

Israel is making incursions into Lebanon, and there is growing anticipation that Trump could deploy ground forces into Iran, potentially targeting Kharg Island, a critical hub for oil exports.

Oil has surged, with Brent and WTI crude prices climbing sharply. Gold, despite its reputation as a geopolitical hedge, has actually been pulling back after being a crowded trade for the past two years. Defense stock performance has been muted on the backs of an already a strong run, leaving valuations stretched and limiting the potential for further upside.

So, what is left? Short of sitting in cash, I think there are still a few options worth considering. Today’s ETF portfolio looks to Switzerland for its stability.

The country maintains political neutrality and is not part of NATO. It has a long-standing reputation for strong financial institutions and a highly credible central bank. The Swiss franc is widely viewed as a safe-haven currency, often strengthening during periods of global stress.

Geography also plays a role. Switzerland’s mountainous terrain has historically made it difficult to invade, and the country has invested heavily in civil defense infrastructure, including extensive bunker systems. It also maintains a well-armed citizenry under its militia system, reinforcing its defensive posture.

Keeping things simple, this portfolio uses just two ETFs, one from iShares and one from Invesco, in a 75% and 25% allocation. It is admittedly geographically concentrated, but the goal is to create a more defensive and unorthodox allocation that could hold up if the current conflict continues to escalate.

75% in Swiss Equities

The bulk of this portfolio remains invested in equities despite the current volatility. I think owning stocks is still the better path for long-term investors.

Over time, companies expand into new markets, sell more products, find ways to cut costs, and pass that value back to shareholders through earnings growth, share buybacks, and dividend payout increases.

For exposure to Switzerland, the core holding here is the iShares MSCI Switzerland ETF (EWL). It is not the cheapest option, with a 0.50% expense ratio, but it is the most established. The fund has around $1.4 billion in assets under management and a long track record dating back to March 12, 1996.

EWL tracks the MSCI Switzerland 25/50 Index and holds about 40 companies. The sector composition looks very different from the U.S. market. Instead of being dominated by technology, healthcare makes up about 39.5% of the portfolio, followed by financials at 17.9%, consumer staples at 15%, and industrials at 10.1%.

The holdings are also quite recognizable. The ETF includes pharmaceutical giants like Novartis and Roche, consumer staples heavyweight Nestlé, and financial institutions such as Zurich Insurance and UBS Group.

On the income side, EWL offers a 1.65% 30-day SEC yield. Distributions are paid semi-annually rather than quarterly. Over the past 10 years, the ETF has delivered an annualized total return of 8.99% on a net asset value basis.

25% in the Swiss Franc

We still want a fixed income–like component here for ballast, but accessing Swiss bonds in ETF form is not exactly straightforward for most investors. The next best option is currency exposure.

That is where the Invesco CurrencyShares Swiss Franc Trust (FXF) comes in. The ETF charges a 0.40% expense ratio and has about $550 million in assets under management.

The structure is very simple. FXF just tracks the price of the Swiss franc relative to the U.S. dollar. It is also fully physically backed, meaning it actually holds Swiss francs rather than using swaps or futures.

I like FXF because it is fairly liquid. The median bid-ask spread is around 0.03%, which is quite reasonable. For most investors, that is going to be far more convenient than trying to convert into Swiss francs directly through a bank or currency exchange.

One thing to be aware of is that you are not going to get any yield here. Even though currencies are often associated with interest rates, the Swiss National Bank currently maintains a policy rate of 0%. As a result, FXF does not provide income. Unless rates move higher, that is unlikely to change.

Switzerland has low inflation and prioritizes currency stability, which allows it to keep rates at the lower end compared to other central banks. Rather than pushing rates negative again, the focus has been more on currency market interventions.

From a return perspective, the long-term profile is about what you would expect from a currency holding. Over the past 10 years, FXF has returned roughly 1.74% annualized. There is not much return because there is not much risk.

But during periods of stress, it can do its job. Over the past year, FXF is up 16.74% as of February 28, reflecting its role as a safe-haven asset. For rebalancing, that kind of behavior can be very useful.