Leonteq CHF Overnight

Investing / Others
1

Hello!

I am still defining my allocation to fixed income and I discovered the following product: Leonteq CHF Overnight Return Index ETP (ISIN: CH1390861214).

There are almost no information in this forum, nor on the Poor Swiss or Reddit.

What do you know about it? Is it safe to park liquidity there? I’ve read of someone claiming that Leonteq is basically a scam.

Any info appreciated.

Thanks

2

Leonteq is definitely not a scam (doesn’t mean the can’t go belly up) and this ETP looks fairly sensible at a quick glance.

Edit: Maybe the point you heard was that some of their products are scams? I wouldn’t say that either (by definition of what a scam is), but they certainly have products only stupid uninformed people invest into.

3

Who is this “someone”?

Basically, as the name says, it tracks the SARON (Swiss Average Rate Overnight) - 0.10%, because that’s their administration fee. That’s the whole product. But with these low interest rates, it really doesn’t make a lot of sense nowadays.

Here they have all the information and factsheets available:

4

Also fyi wrt to taxation, this is one of the few product which are taxed based on realized capital gain.

(Was discussed in the fixed income thread)

5

nothing to do with this, though.

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6

According to Bloomberg this is a money market instrument, charging 0.1%. No info about the market cap.

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Since you indicate you want to park liquidity, why pick this instead of a well established CHF money market fund with a reputable issuer?

Well, Leonteq is the issuer of said security …

Doesn’t mean you’ll lose your money on this if Leonteq goes belly up, but there might be some bumps along the ways.

Here’s a juicier article on the recent FINMA fine: Atom-Einschlag bei Leonteq – Inside Paradeplatz (in German).

7

When I checked into it, it seems actually fairly safe (SIX is the counterparty iirc). Though being taxed on capital gains means you have a fair tax, but that’s more taxes than using an MMF with tax optimized holdings (tax yield below actual yield).

edit: the finma issue is about who they partner with for distribution, not about their ETP setups. (Tho it could hint at judgement lapses which isn’t a great look)

8

UBS recently listed an ETF that tracks the Saron rate (Product page). It compounds the daily interest rates and is traded on SIX. Could be an interesting product when interest rates rise again eventually. TER / management fee seems to be 0.1% p.a.

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9

Definitely looks like the go-to MMF-like product in the future.

For now, super useless though and in June you‘ll even start losing money when rates hit 0.

Odd launch time though. Maybe some institutions have interest in it still.

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10

Some MMFs will likely still be better:

  • extra yield (at the cost of really small extra risk)
  • tax treatment (at least some ZKB funds were having taxable income much lower than actual yield, we’ll have to see what ictax thinks about the new fund, as a comparison the Leonteq ETP is taxed as capital gain)
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11

I wonder where this comes from and if that will be the case in the future.

12

You can pick low coupon bonds to minimize the distributions.

13

Those are then likely very old legacy bonds or something. Some with negative yields also likely. That effect would certainly get lower and eventually disappear in the future.

I‘ll mqybe have a look at the holdings, if I come around.

14

There’s also things like hedged BoJ bonds, etc.

edit: with yield going down again (globally), I’d expect there’s going to be quite a few options to optimize taxable return, I think the difference is that many MMFs don’t optimize for that at all, some even have a taxable yield well above the real return (I don’t know if ZKB does it intentionally though).

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15

As per ICtax, that’s a OUIP, meaning that the capital gain at sale is taxable as income.

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