It’s a fund, so it is not insured but regulated and, unlike bank accounts and short/medium term notes, the fund’s assets must be segregated from the managing company’s funds. I mean, I don’t think it is more “risky” than a savings account, the “insurance” is just done differently.
Yes, I wouldn’t be worried about the fund company itself. The issue is if the fund puts the assets in a bank or other company that blows up overnight (CS style).
(It’s really not supposed to happen, at least for the reputable ones, they’d only store the money in good assets with a lot of diversification, e.g. looking at a snapshot for the pictet MMF, the top holding is 2.6% of Japan T-Bill, but then there’s going to be counterparty risk of the CHF hedging, etc.)
But then 2008 tells us things can go badly for MMFs (there’s been more regulation since then, both in US and EU side).
Yes, and that’s what prevents me from seriously thinking about investing in MMF. It supposed to be safe and low yield, but may suddenly turn out to be risky and negative yield.
Did you find anything yet? I’m looking for a low-risk, short-duration, low-friction instrument to stash CHF temporarily within an IBKR account.
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I use some pictet MMFs, there’s a 5 CHF transaction fee so depends how long you plan on using it.
(and I heard you can’t do frequent buy/sell, if you sell you can’t buy again for some time – maybe one month?)
Same here, I currently park my short term liquidity in “Pictet CH-Short-Term Money Market CHF”. I followed the holdings of quite a few funds for some time, this was the most convincing to me (a lot of SNB bills and hedged foreign government bonds, whereas others invest heavily in corporate bonds).
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I was looking for something more liquid which I could buy/sell daily if needed.
May I asked, where you bought it? Swissquote?
IBKR (20 characters)
Hi, I wanted to ask you as you started your research a while ago. Do you still recommend Pictet CH-Short-Term Money Market CHF as your best pick to build a CHF exposure and reduce my allocation to EUR ? Thanks for the heads up !
I’ve been using some Pictet MMF, but tax handling doesn’t look very favorable (it looks like the taxable income is quite a bit higher than the actual growth), so I’m thinking about doing things differently.
I still have a relatively large position in it, but my situation is a bit special, as I hold these funds in an LLC, resulting in some different considerations (taxation of capital gains / losses & dividends, many special offers from banks not available, etc…). For a private investor, MMFs are not that ideal, because they distribute all proceeds once a year (which reduces the fund value by this amount). This means in an extreme case that if you invest 100k before the dividend date, you will receive 1’600 Fr. in interest (taxable) and the fund value will decrease by the same amount (which you cannot claim as a capital loss). So you pay taxes on 1’600 Fr., although you earned nothing.
[Technically, you can avoid this by selling just before the dividend date and buying back directly afterwards, but I am not sure how legal this is, because you then pay no taxes at all]
For 100k as a private investor, I would recommend a savings account (WIR, Cembra, willBe, or Radicant)
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I’ve been trying to figure this out. I tried asking chatgpt, but my take away was that it wasn’t technically illegal. I find that very hard to believe though since selling and buying to avoid the dividend would be such an easy way to avoid paying taxes.
Can anyone chime in on this?
My assumption is that it is “Steuerumgehung”: Steuerumgehung | Schweizer Recht verständlich erklärt | lexwiki.ch |
It fulfils all three conditions (selling and buying one day afterwards is weird and only explainable with the tax saving and it actually results in a tax saving). So it is not really illegal, but the tax authorities will probably make you pay taxes on the interest nevertheless.
This article agrees that systematically selling stocks right before the dividend date is “Steuerumgehung”
Verkauft beispielsweise eine Privatperson Aktien vor dem Dividendenstichtag, vermeidet sie einen einkommenssteuerbaren Dividendenertrag. Dies ist eine erlaubte Steuereinsparung. Macht sie dies jedoch systematisch, liegt eine Steuerumgehung vor.
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‘example, if a private individual sells shares before the dividend record date, they avoid income taxable dividend income. This is a permitted tax saving. However, if it does this systematically, it is tax avoidance.’
Weird that it still says that is permitted. What is the definition of systematically? For example the CHF MMF is a yearly dividend. Would selling it 2 weeks before and buying 2 weeks post, once a year be considered systematically?
How about doing it once every couple of years? Or only the first year when you enter the MMF, and are not aligned with the dividend payment (to avoid paying taxes on dividends which you didn’t ‘earn’).
You could rotate between fund with different dividend dates.
Something to explore:
The lowest risk strategy is a 100% money market fund. TER 0.14% p.a.
From the first look, partially CHF hedged, which is a disadvantage from my point of view.
Thanks @Tony1337 !
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What happened to MMF in 2008? I didn’t really follow this.
One large MMF traded below its NAV and was liquidated. There was a government intervention to limit contagion and a run on MMFs.
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