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Francs, profits and gold bars. Is the Swiss National Bank the real refuge?

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It prints Swiss francs, grinds billions in profits and, as if that weren’t enough, keeps over a thousand tons of pure gold (which it owns) in the vaults. It is difficult to imagine a safer investment activity in times of high tension like the present one. And in fact the Swiss National Bank, that is the institution that manages the Confederation’s monetary policy, has not betrayed those who entrusted it with the money in recent months: since the beginning of this 2022 so troubled for the financial markets, its shares, listed on the Zurich Stock Exchange, gained 36%, proving to be an all-round safe haven asset.

“In the war portfolio, lighten shares and focus on safe-haven assets”

Record balance sheets and earnings …

After all, that of the SNB is a singular story, at least as an investment tool, not only because in the world listed central banks can be counted on the fingers of one hand: Greece, Belgium and Japan as well as Switzerland. Its (theoretical) value is difficult to measure, because in 2021 it made profits of 26 billion francs and raised its own capital to over 200 billion, because it has investments in international markets for over one trillion, for the 55 billion of gold reserves and for the possibility of printing money in all respects.

… but a small cap capitalization

In practice, however, the stock capitalizes just 730 million, really a trifle, and also for this reason it goes almost completely unnoticed by the audience of large investors. In fact, it is difficult for a fund or other institutional subjects to venture into the purchase of such a particular asset, regulated as it is by a special law dated 1907 which provides, among other things, a restriction on the right to vote for non-controlling shareholders (count individually for just a maximum of 100 shares) and the distribution of profits to the Swiss cantons (main shareholders together with the cantonal banks) to be used exclusively for social initiatives.

I would consider it an asset to be included in the portfolio in a defensive key alongside gold, dollars or francs, with a share between 5 and 10 percent

What restrains those who work on the market professionally is the fact that it is basically a “political tool” and that the very leaders of Swiss institutions do not like to attract excessive attention to it. For a saver, on the other hand, it could represent an alternative not to be neglected, in the current period of high volatility and beyond. “I would consider it an asset to be included in the portfolio in a defensive key alongside gold, dollars or francs”, suggests Graziano Deli, a member of the Frame Am investment committee, who also goes so far as to recommend exposing oneself with “a stake between 5 and 10 percent “.

The benefit of a huge and diverse portfolio

Compared to other safe-haven assets, Bns would have a potential additional advantage given by the invested portfolio: “By selling francs to avoid an excessive appreciation of the exchange – explains Deli – the Bns receives large quantities of dolars and dollars which it then reinvests 80% in bonds and for 20% in shares ». In this way, a treasury was created that suffers in moments of tension on the markets, but which can on the contrary give further sprint in the bullish phases and when in theory the safe-haven assets tend to underperform.