Swiss real estate as a stable anchor in the portfolio

With the SNB's latest interest rate cuts, the starting position of the Swiss real estate market is much more positive. The majority of mortgages are currently at fixed interest rates and are once again well below 2%, and default risks are low thanks to stable or rising rental income. Rents on offer for apartments recently rose by over 4% across Switzerland compared to the previous year. Various factors are responsible for this: while the number of apartments with planning permission is around 9% below the long-term average, net migration is around 30% above the historical average. Rents for office and retail space in the prime segment have also risen. Thanks to the growth in employment, demand for commercial space is also likely to be intact.

The starting position for real estate investments is therefore fundamentally stable. It is therefore not surprising that the real estate share of Swiss pension funds averages over 20% of total assets. For private individuals, this share averages 3-5%. Real estate investments offer stable, regular income and low volatility.

Investment in the Swiss real estate market

There are various ways for private investors to access the Swiss real estate market. One option is to invest specifically in individual real estate funds, although this requires careful fundamental analysis to assess the quality of the respective funds. Alternatively, it is possible to invest in a basket (also known as an index) of real estate funds. Such a strategy enables investors to diversify their portfolio cost-effectively with a single transaction and thus significantly reduce the concentration risk.

The SXI Real Estate Funds Broad Index (SWIIT Index) comprises all 43 real estate funds currently listed on the SIX Swiss Exchange that have invested at least 75% of their fund assets in Switzerland. The real estate funds included in the index offer optimal diversification in terms of regions and different types of use. At over 50%, the residential sector accounts for the largest share of the index and ensures stable and largely secure returns.

While the SWIIT Index measures the daily performance of listed Swiss real estate funds that are open to all investors, the KGAST* Real Estate Index measures the performance of Swiss non-listed real estate investment groups. A comparison of the performance of the SWIIT with the KGAST Real Estate Index shows that both indices have performed largely similarly over the past 10 years. In particular, factors such as stable rental yields, rising real estate prices and the low interest rate environment have contributed to the positive development.

In practice, it is not possible to buy an index directly. However, there are index funds that aim to replicate the performance of an index and are therefore ideal for investing.
With the Swiss Life Index Funds III (CH) Real Estate Switzerland, Swiss Life Asset Managers offers such an index fund. This allows investors to participate in the performance of the SWIIT Index.

What are the main advantages of index funds?

Index funds are cost-effective. An important advantage is the low cost compared to other investment funds. In addition, index funds domiciled in Switzerland do not incur any stamp duties when buying or selling.
Index funds are safe. Index funds enjoy the legal status of special assets. This means that investors' units are kept separate from the fund company's assets and are not affected in the event of insolvency.

Index funds are transparent. As index funds track an index, the information on the composition and performance expectations is easily accessible and understandable. They are also regulated by the supervisory authority (FINMA).
Index funds offer diversification. As the invested capital is spread across numerous instruments, the overall risk for the investor is significantly reduced, especially as negative developments in the value of individual instruments can be cushioned.

Index funds are liquid. Index funds can be traded daily and provide simple and timely access to the market in order to participate optimally in the performance.

Your financial goals at a glance

Investing in an index fund for the Swiss real estate market allows you to benefit from the stability and returns of this sector. Index funds are easily accessible and even small investments are possible. Swiss Life Asset Managers, as one of the largest real estate investors in Switzerland, offers you the necessary expertise. A diversified approach not only strengthens your investment strategy, but also gives you the opportunity to benefit from the returns of one of the most attractive real estate markets in Europe.

Disclaimer

This document contains advertising. This document has been prepared with the greatest possible care and to the best of our knowledge and belief. However, it offers no guarantee for the content and completeness and no liability for losses arising from the use of this information. This document may contain "forward-looking statements" that express our judgment and expectations as of a particular date, and various risks, uncertainties and other factors could cause actual developments and results to differ materially from our expectations. The information contained herein is for information purposes only and should not be construed as a contractual document or investment advice. Before subscribing, investors should obtain and carefully read the detailed information on the fund in question in the relevant regulatory documents (such as the prospectus, fund contract, PRIIPs KID and the latest annual / semi-annual reports), which are the sole legal basis for the purchase of fund units. They are available free of charge in printed or electronic form from the fund management company, Swiss Life Asset Management AG, General-Guisan-Quai 40, 8002 Zurich or on www.swisslife-am.com available. The income and value of fund units may fall or rise and a total loss of the capital invested in the units cannot be ruled out. Historical performance is not a sufficient basis for forecasting future value and price trends. Past performance is not an indicator of current or future performance. It is in no way a guarantee of future performance or capital. All commissions and costs incurred at fund level are included in the performance (e.g. management fee). Costs incurred at client level are not included in the performance (issue and redemption costs and commissions, custody account fees, etc.). Both Swiss Life Ltd and the other members of the Swiss Life Group are entitled to hold positions in this fund and to buy or sell them. Swiss Life Asset Managers funds may not be offered for sale or sold in the USA or on behalf of US citizens or US persons resident in the USA. "Swiss Life Asset Managers" is the brand name for the asset management activities of the Swiss Life Group.  
More information at https://invest.swisslife-am.com/. Source: Swiss Life Asset Managers (unless otherwise stated). All rights reserved. Contact: info@swisslife-am.com.