CHF corporate bonds

Investing / Portfolios
1

Dear MP community,

I have some excess liquidity (roughy 1 million CHF) in my LLC that I want to invest in CHF corporate bonds and I am currently looking for the best broker. My portfolio is at IBKR, but they sadly do not offer CHF bonds. I considered SwissQuote, but the depot fee would be 1000 Fr. / year there. DeGiro would be an interesting alternative, but as far as I can see, you cannot trade bonds at SIX with them (Produkte & Handelsplätze | Weltweiter Börsenhandel | DEGIRO) and the trading volume for CHF bonds at Frankfurt is usually very low as far as I know. Do you have any other recommendations for me?

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Yes, it is mentioned here that there is no cap for corporate accounts / “Juristische Personen”: Kontogebühren, Depotgebühren und Sonstiges | Swissquote

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I can try that, but they do not have any CHF bonds (not even government bonds), so I would be quite surprised if they would agree to list them.

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Postfinance, Flow bank.

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Those are sadly more expensive. Flow bank has a 0.2% commission (i.e., 2,000 Fr. for 1 million) when you buy bonds, PF would be 1,800 Fr. for 10 buys of 100,000 Fr.
According to moneyland, cash.ch seems to be the cheapest option in Switzerland (only 29 Fr. per trade, 400 Fr. per year when you keep it just below 1 million), but I am not sure if they support corporate accounts, I will have to call them.

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8

What about an ETF on corporate bonds?

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9

Why do you want swiss corporate bonds anyway? Their risk-return profile is between stocks and government bonds, so maybe you think about an alternative assets allocation?

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I am not a big fan of bonds ETF’s. Individual bonds allow me to pick the duration according to my liquidity requirements, whereas I might have to sell the ETF at a loss. Of course, this does not matter when you invest for a very long time span and then I would also consider a ETF, but for medium-term investments I like to buy individual bonds and hold them until maturity.

That is also the reason I want to buy Swiss corporate bonds. I have some money that I only need in 3 - 5 years. Investing it in the stock market for that duration is too risky for me, whereas the risk for investment grade corporate bonds (that are held until maturity, i.e. no interest rate risk) is acceptable for me.
Of course, I am also open for an alternative asset allocation, but I cannot really think of a good alternative for such a timespan.

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Kassenobligationen if you can buy them as a corporate client. Or maybe not if you are not insured.

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I considered Kassenobligationen, but the coupon (or rather the spread to the YTM of similar bonds) is very large currently. For instance, you get a 1.0% coupon for a 5 year Cembra Kassenobligation, whereas a 5 year bond of them has a YTM of 2.6%. In theory, the Kassenobligation should even have a higher yield, as they are less liquid and you can only sell them with a hefty fee.

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Kassenobligationen are protected deposits (esisuisse) up to CHF 100k per bank and client (incl. legal entities), which pushes the interest rate closer to AAA bonds than regular (lower rated) bonds of the bank, despite not being liquid. I don’t think Kassenobligationen make sense beyond that amount (per bank).

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May I ask why you are keeping that much excess liquidity in your LLC? I also keep some excess liquidity in my LLCs as well, but not 1 million.

You said that you’ll only need the money in 3-5 years. Are you planning to defer taxes and maybe relocate to a different canton before paying the money out as dividends?

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Yes, mainly for tax reasons. I already live in a canton with a very low tax rate, but I currently still have to pay 3% “military tax” (Militärpflichtersatz). And one option that I am considering is FIRE in 5 years (in a country that does not tax foreign dividends).

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Edit: those are quarterly fees, forget I wrote anything (it’s not cheaper).

Old message:
TradeDirect (BCV) seems cheaper than Swissquote as far as custody fees for large amounts are concerned. Might be worth a call to see what conditions they could offer you:

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Did you check that plan with a financial advisor? I think I know a thing or two about paying out dividends from LLCs, but I’m not sure if your plan is possible. I think it’s a gray zone, because you are avoiding Swiss taxes on some level. Not saying it’s impossible though.

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No, my main motivation is the military tax, the thing with a country that does not tax foreign dividends is something that came to my mind recently, but I would definitely need to check this with a financial advisor.

I personally do not see a reason why it should not work. It is important that my salary for the years before was customary, otherwise the AHV would reclassify some of the dividends as salary (this even happens in Switzerland). And the country I am relocating to would need to have a double tax treaty to get the Swiss withholding tax back. But other than that, this would simply be a Swiss LLC that pays out dividends to a foreign shareholder, as it happens quite a lot.
But it sounds a bit too good to be true (although there are some loopholes when it comes to leaving the country, e.g. paying out your pension fund and coming back to Switzerland a few years afterwards), so there may be a special provision for that somewhere.

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That’s right - I also know of some cases where it happened.

Please remember that one managing director still needs to have his/her residency in Switzerland. If you are the only managing director, you have to find a deputy (tax advisor is fine, but it will cost you some money).

That’s the thing I also assume. I don’t know any country which doesn’t tax foreign dividends. Another thing: you might have to pay more taxes for your income compared to paying out in Switzerland. The only country which comes to mind is UAE: very low income taxes. Not sure if they have a double tax treaty with Switzerland though.

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Many of them have some special restrictions (e.g., only passive income for Georgia) and you would need to check the fine print, but the following countries come to my mind besides UAE:
Bahamas, British Virgin Islands, Cayman Islands, Georgia, Cyprus, Portugal (NHR program)

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19 posts were merged into an existing topic: Corporate bonds funds

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The iShares Core CHF Corporate Bond ETF (CH) is not a government bond ETF, but I skimmed through the first few listings and most of these companies seem quite big and stable and do not seem on the verge of defaulting on their loans.
The Weighted Avg YTM of 2.04% seems quite attractive when also taking in account the Weighted Avg Coupon of only 0.80%. If we take 20% marginal tax rate (0.16% deduction from the coupon) and 0.15%TER this would leave 1.73% nominal yield on this ETF, assuming no defaults.
Wouldn’t this be more attractive than a savings account? Am I missing something here?
The only thing coming to my mind is that the Weighted Avg Maturity is 4.55 yrs, which creates some risk in a rising interest rate environment.

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