Investment fund and strategy fund – what are they?

Investment fund advantages

Investment fund disadvantages

Ready-made investment strategy 

With an investment strategy fund, you buy a ready-made investment strategy

Too expensive

Investment funds are very expensive. Depending on the type and provider, the total cost of the fund, known as TER, can be 2-3%.

By comparison, an ETF, a passive, exchange-traded index fund, costs around 0.20% per year. 

Reduced custody fees

Some of the in-house investment funds are held in the securities custody account at a slightly lower rate. 

No independence

Banks lack objectivity. No bank in the world will recommend anything other than their own strategy funds. Even if there were investment funds that yielded better returns, had better valuations or had lower costs.

Here, the banks are still interested in pushing in-house products into clients' securities portfolios. Because that is how the bank earns the most.

Disappointing return

The investment fund justifies the above-mentioned additional costs with the promised additional return compared to the benchmark index. However, this is not achieved in 97 out of 100 cases. A disappointing performance record. You still pay the high TER. Therefore: a bad deal for you.

Pro forma

In the case of a strategy fund, the fund manager has the possibility of significantly changing the equity and bond proportions. For example, they have the option (depending on the provider and fund) to vary the share of equities between 30 and 70% of the fund's assets. The target allocation is 45%.

If the fund manager is very pessimistic about the further development of the stock market, they could theoretically reduce the share of equities to 30%. In reality, however, they will not do this. They are much more likely to reduce the share of equities from 45 to 42 or perhaps 40%. That makes very little difference to the total return of the investment fund. They do not use the opportunities because it also means risks for him. If they are wrong and the stock market rises, they only participate with 30 instead of 45% in the upward movement.

If the stock market actually goes down, they would have protected your assets better if they had reduced to 30% euqities. (By the way: we think that going back and forth only empties your pockets anyway, it is better to strategically stick to the same share of equities, it pays off better in the long run).

But it is precisely for this asset management that you pay the expensive fund manager and their team. You should avoid this pro forma activism and certainly not co-finance it.

Issue commission and redemption fees

Fund providers may charge costs for the issue and redemption of units. Redemption commissions are rarely applied to investment funds in Switzerland. Instead, issuing commissions are charged, which can be quite steep. Depending on the provider of the investment fund, it can be 3-6 per cent. Therefore, inform yourself very carefully about these costs, which are not always transparent.