Swiss insider: why I’m not playing CHF weakness

The weakening of the Swiss franc bodes well for exporters but investors should look beyond a short-term currency play, according to Swiss equity star Eleanor Taylor Jolidon.

In September 2011 the Swiss National Bank announced it was prepared to buy as many euros as necessary to stop the franc strengthening beyond 1.20 against the single currency and this held firm for the bulk of 2012. However, since the start of this year, the franc has begun to fall against the US dollar and the euro.

Despite this move, Euro Stars A-rated manager Taylor Jolidon, who co-runs the €154 million UBAM Swiss Equity fund, told Citywire she is not swayed to change her approach.

Instead, Taylor Jolidon said she is looking to increase her cyclical exposure, taking advantage of stronger macroeconomic fundamentals and a returning appetite for export-focused companies.

‘We certainly don’t look to “play” the weaker currency,’ she said. ‘Where the currency comes in is it is clearly going to add momentum to companies and allow them to generate better profit margins due to a weakening franc.’

‘This means the strength of the franc is a consideration, because our general exposure is to companies which are more export led, but I think it will mainly benefit Swiss companies with a domestic focus due to cheaper imports and that is not an attractive market for us.’

Taylor Jolidon said she is, instead, focusing on Swiss companies with strong links to the German market. She said this will allow firms greater access to the emerging market growth off the back of Germany’s export strength.

‘Germany has developed its export potential in the emerging markets and most Swiss exports will go into end products which are sold to these markets.’

Cyclical stance

At a portfolio level, Taylor Jolidon said she has put the fund on a more cyclical footing since the beginning of the year. This is due to a more bullish outlook on the global market as a whole.

‘We have trimmed some stocks that we thought were egregiously priced, such as Novartis, and focused on stocks we expect to benefit from a cyclical upswing and we have reinforced strong positions in stocks such as ABB and Clariant,’ she said.

Novartis remains a strong position in the portfolio at 4.5% of the portfolio, while Clariant is a 3.1% position and Zurich-based electrical equipment firm ABB is the biggest position in the portfolio at 6.7%.

The Clariant and ABB position reflect modest overweights compared to the fund’s benchmark, the Swiss Performance Index, while the Novartis position is a 11.3% underweight.

The UBAM Swiss Equity fund, which is co-run by Euro Stars A-rated manager Martin Moeller, has returned 25.18% in the three years to the end of January 2013. This compares to its Citywire benchmark, Swiss Performance Index TR, rose 21.89%.