How Swiss funds are rethinking FX risk in 2026

When markets turn volatile, money tends to find its way to the Swiss franc. That instinct has been tested repeatedly over the past two years, as geopolitical shocks and energy-market swings have driven episodic flight-to-safety flows into CHF, at times increasing expectations that the Swiss National Bank would act to limit excessive currency strength. For Swiss fund managers running internationally exposed portfolios, the result is an FX environment that has become both more reactive and more expensive to navigate.

Our latest survey data suggests Swiss fund managers are responding not by stepping back from currency risk management, but by adapting their approach. Curious? Let’s take a closer look.

 

Swiss funds are paying more to hedge - and extending anyway

Swiss fund managers experienced some of the sharpest increases in FX hedging costs across Europe over the past year. Mean hedging costs rose by 74%, compared with a European average of 64%.

Part of the pressure is coming from broader moves across global interest-rate markets. As Nick Wood, our Chief Trading Officer explains, EUR/CHF and USD/CHF pricing remains heavily influenced by changing Fed and ECB rate expectations, with markets repeatedly repricing inflation and growth forecasts as energy prices and geopolitical tensions continue to shift. The resulting swings in interest-rate expectations have become an increasingly important driver of CHF hedging costs.

What stands out amongst this is that few Swiss funds appear willing to reduce hedge exposure despite the rising expense. Swiss funds continue to hedge 53% of their exposure on average while gradually extending hedge tenors, which now stand at a mean 5.95 months.

The reason becomes clearer when looking at the unhedged side of the portfolio. Every Swiss fund surveyed reported unhedged FX losses in 2025, with nearly half describing those losses as very significant.

 

The Credit Suisse shadow over counterparty risk

Ask Swiss fund managers what worries them most about tariff-driven FX volatility and the top answer is not the volatility itself. It is counterparty risk in their hedging transactions, cited by 42% of respondents.

That answer is hard to read without thinking about the collapse of Credit Suisse in March 2023. One of Switzerland’s two global banking giants unravelled in a matter of days, forcing regulators to intervene and leaving markets scrambling to assess the broader fallout. The UBS-Credit Suisse merger turned counterparty diversification from a back-office checkbox into a board-level concern, particularly for funds dependent on a concentrated domestic banking market. Yet many managers still route most of their FX activity through one or two CHF-domiciled banks, as observed by our Head of Fund Solutions, Joe McKenna.

The credit environment has tightened around that concentration. More than half of Swiss respondents said credit providers had tightened lending standards over the past year, well above the 40% European average, and 84% reported higher rates and fees. Tariff-driven market shocks can force funds to roll, unwind, or replace hedges more quickly as currencies reprice abruptly. Those periods of volatility can also make counterparties more cautious about extending liquidity and risk capacity. For funds with concentrated banking relationships, execution flexibility can deteriorate precisely when it is needed most.

It is little surprise, then, that 40% of Swiss respondents told us they are delaying major strategic decisions until the outlook clears.

 

Options, outsourcing, and a quieter shift in FX management

Swiss funds have made a decisive move toward FX options over the past year 93% of Swiss respondents reported increased usage, with 38% describing that increase as significant.

The shift reflects the growing difficulty of managing CHF exposure in a market where safe-haven flows, central-bank expectations, and geopolitical developments can quickly reprice currencies in either direction. With Swiss funds hedging just over half of FX exposure on average, options can provide downside protection while still allowing some participation in favourable currency moves. That flexibility has become increasingly valuable as markets repeatedly reassess rate expectations and currency direction over relatively short periods.

The same preference for flexibility is increasingly visible in how Swiss funds are structuring their FX operations as 33% now outsource FX processes to gain access to specialised expertise — ahead of risk management and compliance at 32% and cost reduction at 27%. The sequencing matters, for smaller managers running lean treasury teams, outsourcing increasingly looks less like a workload fix and more like a route to capabilities that are difficult to build internally.

 

Swiss fund managers are not hedging their bets on AI - they’re deploying it

If there is one area where Swiss fund managers stand genuinely apart from their European peers, it is AI adoption. A quarter are already using AI in FX workflows, around double the European average of 12%. Another 41% are actively exploring it, and 27% are pursuing AI efficiencies more aggressively.

The driver, particularly for boutique managers, is operational rather than financial, as Joe McKenna notes. In small Swiss treasury teams, CFOs often oversee FX execution and liquidity management directly. For those teams, AI is less about shaving execution costs and more about visibility, faster reporting, and reduced manual workload - consolidating exposure data, monitoring conditions in real time, running scenarios, and flagging hedging requirements across multi-currency portfolios.

The strategic implication is significant, funds using these tools can move from static hedge maintenance toward continuously monitored frameworks. In volatile markets, that responsiveness could separate strong treasury functions from the rest.

 

Conclusion

Taken together, these shifts point to a Swiss fund-management sector that is becoming more deliberate about FX rather than more cautious. Costs are up, concentration risk is harder to ignore, and the tools - options, outsourced execution, AI-driven monitoring - are being chosen for what they enable, not what they save. The funds that emerge strongest are likely to be the ones treating FX not as a cost to manage, but as a strategic risk function requiring greater flexibility, oversight, and operational sophistication.

 

Please refer to our Research Disclosure Page for more information on the data referred to in the above.