Reacting to the recent shock 39% tariff rate applied by the US on exports from Switzerland, Jasmeet Munday, fund manager for Global Opportunities at J O Hambro Capital Management (JOHCM) has noted the diversity in the underlying fundamentals of Swiss companies that must be taken into account.
He commented: “Service orientated industrials companies are well insulated from tariffs vs companies who lack a service component to sales. These services consist of people and centres located close to their end customer – For example, an elevator service is done by the regional centre of that business undertaken by local employees who will be unaffected by tariffs.”
“Where this may become difficult is where spare parts, which are often high margin, are being manufactured outside of the US and then bought in to fulfil the replacement part demand. Although supply chains may have local assembly there may be parts being purchased across the world and not just in Switzerland to produce the replacement part or the original piece of equipment. To the extreme of this would be a Swiss watch manufacturer, made in Switzerland and relatively easy to export, will bear the brunt of tariffs. Industrials are not this extreme and often have local manufacturing sites to offset tariff impacts. Overall, the more service orientated industrial companies will be relatively less effected by tariffs.”
“If these tariffs turn out to be sustainable, then one longer-term impact will be to broaden out supply chains and manufacturing to regional centres to avoid tariffs. This will require a ramp up in capital expenditure and therefore more cashflows being diverted here, which will require healthy balance sheets to fund this investment. The capital expenditure may be a necessity to continue operations in the USA but the returns on this capital expenditure may not be commensurately high as it would be replacing an already efficient global supply chain. Therefore, companies which are forced to spend on lower returning capital expenditure may see a lower premium applied to their shares.”
“We would look for service-orientated companies, where manufacturing is already spread out globally and therefore relatively sheltered from tariffs, where these businesses should not see a change in the risk environment or multiple applied to the stock.”
H1 Swiss net flows
How the trade policy-related uncertainty will translate into flows in the domestic Swiss funds industry is to be seen.
According to the Asset Management Association Switzerland (AMAS), “The first half of 2025 was very challenging for investors due to the unpredictable developments in US trade policy,” according to Adrian Schatzmann, CEO of AMAS.
“Given the turbulence, net new money inflows with a preference for equities are a welcome sign. Investor confidence remained unshaken by the ongoing geopolitical uncertainties.”
The local industry volume was up 1.65% through the first six months of 2025 versus the end of 2024, to some CHF1.6trn. Net new inflows were seen across multiple asset classes, including equities, bonds, money market, commodities and alternative investments.
