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

What is the Swiss Franc ETF (FXF)?

The CurrencyShares Swiss Franc Trust (FXF) is an exchange-traded fund designed to track the price of the Swiss franc (CHF) relative to the US dollar. Launched in 2006, FXF holds physical Swiss francs in deposit accounts, making it the most direct way for investors to gain exposure to CHF movements without opening foreign bank accounts or trading forex directly. Each FXF share represents approximately 100 Swiss francs, with the fund’s value fluctuating with the USD/CHF exchange rate.

Why Consider Investing in the Swiss Franc via FXF?

The Swiss franc has historically been a “safe-haven” currency during economic turbulence. Here’s why investors turn to FXF:

• Diversification: Reduces portfolio reliance on USD-denominated assets
• Inflation Hedge: CHF’s stability protects against currency devaluation
• Geopolitical Safety: Switzerland’s political neutrality and strong economy attract capital during crises
• Low Correlation: Often moves independently of stocks and bonds
• Swiss National Bank Policy: Conservative monetary approach supports currency strength

How FXF Works: Mechanics and Structure

FXF operates as a grantor trust, meaning it physically holds Swiss francs in JP Morgan Chase Bank accounts. When you buy FXF shares:

1. Your capital is converted to CHF at prevailing rates
2. Fund holds currency in interest-bearing accounts
3. Share price adjusts daily based on USD/CHF exchange rates
4. Interest earned is distributed as dividends (typically minimal)

The fund’s expense ratio is 0.40% annually – deducted from accrued interest. Unlike leveraged ETFs, FXF provides 1:1 exposure without compounding risks.

Key Benefits of Choosing FXF

• Accessibility: Trade like a stock through any brokerage (NYSE Arca: FXF)
• Transparency: Daily disclosure of CHF holdings
• Liquidity: Average daily volume exceeds 100,000 shares
• Cost Efficiency: Lower expenses than forex trading commissions
• Tax Treatment: Gains taxed as ordinary income (not collectibles)

Critical Risks to Understand

While FXF offers advantages, consider these risks:

• Currency Volatility: CHF can swing sharply during SNB interventions
• Negative Rates: Swiss negative interest rates may reduce yields
• USD Strength: Rallying US dollar diminishes FXF’s value
• Inflation Differences: Higher US inflation could weaken CHF purchasing power
• Limited Upside: Currencies rarely deliver equity-like returns long-term

How to Invest in FXF: A Step-by-Step Guide

1. Open a brokerage account supporting ETF trading
2. Research current USD/CHF trends and SNB policies
3. Determine allocation (typically 5-10% of portfolio for currency exposure)
4. Place trade using ticker “FXF”
5. Monitor SNB announcements and global risk sentiment
6. Use limit orders to control entry/exit prices

FXF vs. Alternatives: How It Compares

Other CHF exposure methods include:

• Forex Trading: Higher leverage but requires specialized knowledge
• Swiss Stocks/ETFs: Equity risk overshadows currency exposure
• Multi-Currency ETFs: Less pure CHF focus than FXF
• Bank Accounts: Complex for non-residents with lower accessibility

FXF remains the most efficient tool for targeted Swiss franc exposure.

FAQ: Swiss Franc ETF FXF Explained

Q: Does FXF pay dividends?
A: Yes, it distributes minimal interest earned on CHF deposits quarterly, though near-zero Swiss rates have reduced payouts recently.

Q: Can I hold FXF in my IRA?
A: Absolutely. FXF is IRA-eligible, making it tax-efficient for long-term holdings.

Q: How does FXF react to stock market crashes?
A: Historically, CHF appreciates during equity sell-offs, potentially boosting FXF value when stocks decline.

Q: What’s the minimum investment?
A: Just one share (~$95 as of 2023). Fractional shares available through some brokers.

Q: Are there leveraged versions of FXF?
A: No. For leveraged CHF exposure, traders must use forex derivatives.

Q: How is FXF taxed?
A: As a grantor trust, profits are taxed as ordinary income. Hold over a year for lower long-term capital gains rates.

Conclusion: Is FXF Right for You?

The Swiss Franc ETF FXF offers unparalleled access to CHF movements with the convenience of stock trading. While not a standalone investment, it serves as a strategic hedge against dollar weakness and global instability. Conservative investors should limit exposure due to currency volatility, but for those seeking portfolio diversification beyond traditional assets, FXF remains a compelling tool. Always consult a financial advisor to assess how Swiss franc exposure aligns with your risk profile and investment objectives.