The CHF has been a safe currency for investments for a long time. The best example of its strength is the devaluation of the USD against the CHF since currencies started floating in 1971, after the breakdown of the Bretton Woods system. Back then, one CHF was worth 23 cents; today, the same CHF is worth 93 cents – this is an increase of some 300%.
CHF / USD
The USD today
If there is no real improvement to the U. S. budget and current account deficits increase, the USD will most likely continue to lose value. Since these deficits cannot be eliminated or reversed quickly, we will, for the foreseeable future, have to live with a weak USD.
Major currencies vs. USD
The USD has been losing value not only when compared to the CHF, but also when compared to other major currencies. This proves the strength of both the Swiss currency and economy.
How you can profit from this situation
Volcon deals daily with international clients. Many of our clients use the USD as a reference currency, since they are not used to the CHF. Our experience shows that the devaluation of the USD against the CHF can be a major factor for investing in a Swiss annuity denominated in CHF.
For example, a client* who invested USD 250,000 in a CHF-denominated annuity in June 1992 had a policy with a starting value of CHF 335,925, since the exchange rate back then was 1.3437. In December 2008 the same policy was valued at CHF 463,995, which converted to USD using the exchange rate of the day results in USD 433,640.
| Date | Amount in USD | Exchange rate (USD/CHF) | Amount in CHF |
|---|---|---|---|
| June 1992 | USD 250,000 | 1.3437 | CHF 335,925 |
| December 2008 | USD 443,640 | 1.070 | CHF 463,995 |
| Change | 173.46% | -20.37% | 138.12% |
While the policy itself had a return of 138.12% during these 16 years, if the currency gains are added it can be seen that the client achieved a total return of 173.46%.
* figures based on a real case
