UK investors have more than £4bn invested in Swiss stocks, according to broker Hargreaves Lansdown. This is mainly via Europe funds, but also UK Equity Income funds that hold companies with attractive yields such as pharmaceuticals Roche and Novartis. So many fund investors will have seen their holdings affected by last week's move by the Swiss National Bank to ditch the Swiss franc's peg to the euro and the subsequent plunge in the Swiss stock market.
For example, IC Top 100 Fund Woodford Equity Income (GB00BLRZQ513) has 3 per cent in Roche.
"We estimate the average European fund has 9 per cent invested in Swiss stocks, the typical European (ex-UK) tracker fund has around 20 per cent, and the average UK Equity Income fund has just under 1 per cent, though some UK Equity Income funds have closer to 5 per cent invested," says Laith Khalaf, senior analyst at Hargreaves Lansdown.
Global equity and equity income funds may also have exposure to Swiss listed multinationals such as Nestle.
However, despite the fall in the market on 15 January the currency rise against sterling means that UK investors would on average have made around 2 per cent on their Swiss stock market holdings on that day, adds Mr Khalaf. UK Equity Income funds invested in Roche and Novartis would have made more as both these stocks rose about 5 per cent in sterling terms.
"Ultimately, the investment case for Roche remains very attractive, despite the short-term turmoil," comments Woodford Investment Management. "It is a great business and its valuation is very appealing, particularly in yield terms. Roche is expected to pay a dividend in March 2015 of CHF8.2."
Since last week's events the Swiss Franc has fallen against sterling: after spiking at about CHF0.85 to the pound it is down to CHF0.75 to the pound.
Adrian Lowcock, head of investing, AXA Wealth, says investors in Europe funds do not need to reallocate because the managers will have decided what to do. There are still a number of good international companies listed in Switzerland which may be less affected because they earn a lot of their revenues overseas, though may pay dividends in Swiss francs. Europe funds are also allocated across various markets so do not just invest in Switzerland.
However, Mr Lowcock advises against increasing exposure to Europe funds, because while in the short-term sterling investors have benefited from currency moves against the Swiss franc, with this weekend's Greek election and eurozone quantitative easing there is still a lot of uncertainty over the area.
Mr Khalaf warns that short-term volatility is likely, and advocates having an overall diversified portfolio.
But Jason Hollands, managing director at broker Bestinvest, says: "Currency wars are a major theme in the market, and carry considerable risk for both investors and stable relations between countries, since competitive devaluations are ultimately a zero sum game where your advantage comes at someone else's expense. It's for this reason that for some months we have been advocating an increase in use of funds that hedge currency risk for sterling investors when investing in markets such as Japan and the eurozone, when aggressive money printing is set to be the order of the day."
Options include JPMorgan Europe Dynamic (ex-UK) Fund GBP Hedged (GB00BCV7MM92), which offers a sterling hedged C share class.
